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ECONOMICS 


OR 


THE   SCIENCE    OF    WEALTH 


JULIAN  M.  STURTEVANT,  D.D..  LL.  D., 

PROFESSOR    OF    POLITICAL    ECONOMY    IN     ILLINOIS    COLLEGE    AND 


EX-PRESIDENT    OF  THE   SAME. 


el  TIC  ov  iJcAet  spya^ea^ai,  [iiji^k  hd-teTu. 

Paul. 


[TJFI7BRSIT7] 


NEW  YORK 

G.    P.    PUTNAM'S    SONS 

27  AND  29  West  23D  Street 

1886 


< 


6  0Tr^i^ 


OOPTHIOHT, 

»V     G.    P.    PUTNAM'S    SON 
1877. 


PREFACE 


I  HAVE  been  induced  to  undertake  this  work  by  a 
conviction,  the  result  of  many  years  of  experience  as  a 
teacher,  that,  to  a  considerable  extent,  the  definitions  in 
use  in  the  science  of  which  I  have  attempted  to  treat  are 
indeterminate.  Especially  has  it  seemed  to  me,  that 
while  in  all  our  treatises  the  subject  matter  of  the  science 
is  assumed  to  be  wealth,  that  word  is  either  left  without 
any  satisfactory  definition,  or  if  a  valid  definition  is  given, 
it  is  not  applied  to  the  whole  group  of  phenomena  em- 
braced in  it.  The  words  labor  and  capital  also  seem  to 
me  to  have  been  so  loosely  defined,  as  to  give  an  aspect 
of  indefiniteness  to  the  whole  science.  I  can  hardly  be 
mistaken  on  this  point.  I  have  constantly  seen  the 
evidence  in  each  successive  class,  and  whatever  text-book 
I  have  employed,  that  intelligent  minds  are  aware  of  this 
indefiniteness,  and  their  interest  in  the  science  is  dimin- 
ished by  it.  The  same  thing  is  apparent  in  the  general 
public.  Many  intelligent  minds  either  deny  that  any 
science  of  Economics  exists,  or  if  they  admit  its  existence, 
they  regard  it  as  so  vague  and  indeterminate  as  hardly 
to  deserve  to  be  called  a  science.  I  am  compelled  to 
admit  that  these  complaints  are  not  altogether  ground- 


IV  PREFACE. 

less.  ^  If  I  am  right  in  this  admission,  the  ground  of  such 
objections  can  only  be  removed  by  more  accurate  defini- 
tions, and  a  more  logical  method.  Such  definitions  I 
have  attempted  to  frame ;  such  a  method  I  have  sought 
to  pursue.  I  have  endeavored  to  present  the  whole 
science  as  a  logical  development  of  a  single  law  of 
nature.  Such  I  am  sure  it  is,  whether  I  have  succeeded 
in  so  presenting  it  or  not.  If  I  have  failed  in  what  I 
have  attempted,  some  other  one  more  fortunate  will 
surely  succeed.  With  this  frank  statement  of  the  motives 
which  have  induced  me  to  write  this  treatise,  I  submit 
my  work  to  the  candid  judgment  of  the  American  public. 
Surely  no  people  ever  had  more  urgent  need  of  sound 
economic  knowledge  than  we  have  at  the  present  time. 

J.  M.  S. 

Illinois  College,  Sept.  3d,  1877. 


CONTENTS. 


K.  B.    The  figures  refer  to  the  sections. 
INTRODUCTION. 

FIRST   PRINCIPLES.  PAGE   1 

Fundamental  natural  law,  r.  All  ownership  acquired  by 
labor,  2.  Two  distinct  sciences  evolved  from  the  same 
fundamental  law,  3.  Definition  of  Wealth,  3  Defini- 
tion defended,  4  and  5.  Definition  of  Labor,  6.  Labor 
divided  into  two  classes,  6.  Name  of  the  Science,  7. 
Definition  of  Economics,  7.  Science  consists  of  three 
parts,  8.  Social  and  moral  conditions  assumed  by  the 
Science,  8a. 


FART  L— Production. 


CHAPTER  I. 


STIMULI   TO   LABOR.  II 


A  rational  soul,  9.  Impulse  of  appetite,  10.  Need  of  clothing, 
shelter,  etc.,  11.  Love  of  acquisition  and  ownership,  12. 
Love  of  the  beautiful,  13.  Love  of  humanity.  13.  All 
men's  powers  must  be  brought  into  use,  14.  Satisfaction 
of  aitificial  wants,  15.     Necessity  of  Government,  16. 


VI  CONTENTS. 


CHAPTER   II. 

CAPITAL.  I'AGE    1(J 

Love  of  gain  insatiable,  and  why,  17,  Definition  of  Capital,  18. 
Subdivisions  and  other  definitions,  18.  These  definitions 
explained  and  justified,  19.  Sole  function  of  Capital,  20. 
How  Capital  aids  Labor,  first  sustains  the  laborer,  second 
furnishes  tools,  third  provides  machinery,  21.  All  human 
beings  laborers,  22.  Wealth  not  national,  23.  Aid  ren- 
dered by  Capital  to  Labor  unlimited,  24.  Partial  limita- 
tion in  Agriculture,  25.  Land  the  fixed  Capital  of  Agri- 
culture, 25. 


CHAPTER   HI. 

CAPITAL  A   UNIVERSAL  PATRIMONY.  30 

Principle  proved,  26.  Illustrated  by  the  estate  of  A.  T.  Stew- 
art, 27.  Individual  gratification  the  compensation  of  the 
capitalist,  28.  Promotes  improvement  in  architecture, 
28.  How  men  become  public  treasurers,  28.  Public 
treasurers  unfaithful,  29.  Public  liberality,  30.  Recapitu- 
lation, 31. 

CHAPTER  IV. 

DIVISION  OF   LABOR.  37 

Diversity  of  natural  endowments  necessary  to  society,  32.  Law 
of  habit,  33.  Definition  of  division  of  Labor,  33.  Origin 
of  do.,  33.  Extension  of  the  principle  in  modern  manu- 
factures, 34.  Economic  advantages  of  it,  35.  Increases 
skill,  35.  Saves  time  in  learning  trades  and  in  adjusting 
tools  and  adjusts  compensation  to  skill,  35.  Limitations 
of  division  of  Labor,  viz.,  Nature  of  the  process,  Want  of 
sufficient  capital,  and  Demand  for  the  product,  36.  Divis- 
ion of  labor  not  national,  37.  Combination  of  labor,  38. 
Other  classifications  of  labor,  38a. 


CONTENTS.  Vi: 


PART  IL— Exchange. 


CHAPTER  I. 

VALUE.  PAGE  4q 

Definition  of  Exchange,  39.  Importance  of  definition  of  value, 
40.  Definitionof  Competition,  41.  Definition  of  Value, 
Do.  of  Cost,  Do.  of  Price,  Do.  of  Supply  and  Demand,  42. 
Relation  of  Cost  to  Value,  43.  Competition  the  only  test 
of  Value,  44.  Objections  to  Competition  as  a  universal 
test  of  Value.  45. 

CHAPTER    n. 

FLUCTUATIONS   OF   VALUE.  58 

Two  causes  of  fluctuations  of  Value.  First  cause,  variation  of 
cost  of  production,  by  improvement  in  machinery,  by  in- 
creased facilities  of  communications  46.  By  changes  in 
the  cost  of  material,  47.  Second,  variation  of  the  ratio  of 
Supply  and  Demand,  48.  Ratio  of  Supply  to  Demand 
may  be  increased  or  diminished  temporarily  or  perma- 
nently, 48.  When  Supply  can  be  increased  without  in- 
creased cost,  48.  When  Supply  cannot  be  increased 
without  increased  cost,  49.  When  Supply  cannot  be  in- 
creased, 50. 

CHAPTER   HI. 

MONEY.  68 

Money  the  tool  of  Exchange,  51.  Not  the  invention  of  a  sin- 
gle mind,  52.  Definition  of  Money,  53.  Money  mercan- 
tile fixed  Capital,  53.  Gold  and  Silver  suitable  for  Money, 
Universal  desirableness  ;  scarce  and  obtained  by  great 
labor,  One  suited  for  large  Exchanges  the  other  for  small. 
Capability  of  minute  division,  54.  Little  subject  to  fluc- 
tuations of  Value,  55.  Money  cosmopolitan,  56.  Indica- 
tions of  designing  mind,  57. 


Vm  CONTENTS. 


CHAPTER   IV. 


THE  RELATION  OF  THE  GOVERNMENT  TO  THE  MEDIUM  OF 

EXCHANGE.  PAGE  78 

Chimerical  theories,  58.  Right  of  the  Government  to  prescribe 
a  legal  tender,  59.  Notes  of  the  United  States  made  legal 
tender,  60.  Why?  60.  Government  may  not  interfere 
with  contracts,  61.  Should  never  make  its  own  promises 
legal  tender,  61.  Obligation  to  redeem  greenbacks.  62. 
Greenbacks  a  depreciated  currency,  63.  Produce  great 
fluctuations,  63.  No  natural  limit  of  their  amount,  64. 
Value  varies  inversely  as  the  amount,  64.  An  elastic  cur- 
rency impossible,  65.  Communism,  65.  Unstable  currency 
injurious  to  trade,  66. 


CHAPTER  V. 

CREDIT  AND    PAPER   MONEY. 

Credit  founded  in  human  nature,  67.  Always  present  in  the 
relation  of  capital  to  labor,  67.  Definition  of  credit,  67. 
Banks  of  deposit,  68.  Facilitate  exchanges,  6g.  Credit 
cosmopolitan,  6g.  Banks  of  loan,  70.  Banks  of  issue, 
Paper  money,  71.  Convenience  of  paper  money,  71.  Un- 
stable, 72.  Credit  and  legislation,  72.  National  currency, 
73,  Security  for  its  redemption,  73.  Not  a  satisfactory 
solution  of  the  banking  question,  74.  Depends  on  the 
credit  of  the  government,  74.  No  security  for  the  pay- 
ment of  deposits,  74.  Credit  should  be  left  to  its  natural 
development,  74.     Why  not  a  national  bank,  75. 


CHAPTER   VI. 

FUNCTIONS  OF  CREDIT.  102 

Great  influence  of  credit,  76.    Quickens  exchanges,  76.   Unites 
skill  and  capital,  77.     Diminishes  the  amount  of  money 


CONTENTS.  IX 

needed,  78.  By  book  accounts.  By  checks  and  drafts,  78. 
By  bank  notes,  78.  The  real  advantage  of  paper  money 
79.  Will  facilitate  our  return  to  specie  payments,  79. 
Power  of  credit  to  control  prices,  80.  Dangerous  element 
So.  Financial  crisis  of  1837,  80.  Binds  the  whole  civil- 
ized woild  together,  81. 


CHAPTER   VII. 

MONOPOLIES.  PAGE    110 

Foreign  exchanges  not  mternational,  82.  Definition  of  mo- 
nopoly, 82,  What  monopolies  are  defensible,  83.  The 
monopoly  of  protection,  84.  The  word  protection  used 
unfairly,  85.  Competition  the  enemy  of  no  legitimate 
business,  85.  Tends  to  the  perfection  of  the  product,  86. 
General  principles  of  the  science  adverse  to  "protection/* 
87.  Human  race  one  family,  87.  Theoretical  and  prac- 
tical. 88. 


CHAPTER   VIII. 

FREE  TRADE,   OBJECTIONS   CONSIDERED.  II9 

Definition  of  free  trade,  89,  Variety  of  industry  said  to  be  a 
condition  of  national  prosperity,  90.  Not  universally,  90. 
Which  is  cause  and  which  effect,  90.  In  the  beginning  of 
society  variety  of  industry  impossible,  go.  Free  trade 
only  opposed  to  unprofitable  industry,  91.  Protection 
said  to  be  necessary  for  infant  manufactures,  92.  Free 
trade  said  to  deprive  land  of  manure,  93.  Free  trade  said 
to  be  destructive  of  national  independence,  94.  What  is 
national  independence,  94.  Dependence  of  nations  mu- 
tual 95.  Free  trade  tends  to  universal  peace,  96.  It  is 
said  free  trade  should  be  reciprocal,  97.  Self-destructive 
retaliation,  97.  Protection  said  to  encourage  skilled 
labor,  98. 


CONTENTS. 


CHAPTER   IX. 


OBJECTIONS   TO   PROTECTION   CONSIDERED.  PAGE    1 35 

Aim  of  protection.  Means  inadequate,  99.  Injurious  to  public 
morals  99.  Constructs  the  economic  fabric  on  a  false 
principle,  loo.  Corrupts  our  national  legislation,  lOi. 
Destructive  of  statesmanship,  lOi.  In  its  own  nature  un- 
social, 102.  Dangerous  to  our  future,  102.  Self-contra- 
dictory and  self-destructive,  103.  Raises  the  price  of  pro- 
tected articles  103.     Benefits  no  class,  104. 


PART  III.— Distribution. 


CHAPTER   I. 


PRELIMINARY    PRINCIPLES.  I45 

Exchange  and  distribution  distinguishable,  106,  Distribution 
defined,  106.  Controlled  by  competition,  107.  Recapitu- 
lation, 107.     Two-fold  division,  108. 


CHAPTER    II. 

WAGES  DETERMINED  BY  COMPETITION.  I5C 

Wages  defined,  109.  Labor  and  capital  often  in  the  same 
person,  109.  Employer  and  employe,  110.  Location  of 
the  conflict,  no.  Wages  not  controlled  by  the  employer, 
III.  Both  parties  controlled  by  competition,  112.  Nee- 
dle-women cannot  be  relieved  of  competition,  113. 
Wages  above  the  rate  of  competition  injurious  to  em- 
ployes, 113.     Minimum  and  maximum  of  wages,  114. 


CONTENTS.  XI 

CHAPTER    III. 

WAGES  AS  AFFECTED  BY   COMBINATION.  PAGE   l60 

Combination  of  laborers,  115.     Of  capitalists,  115.     The  com- 
peting unit  individual  not  social,   115.     Strike  defined, 

116.  When  it  can  and  when  it  cannot  succeed,  116. 
Trades-unions,    their    objects,   117.     Often    monopolies, 

117.  Consequences  if  successful,  118.  Success  impossi- 
ble, 119.  Cannot  control  all  workmen,  119.  Will  arrest 
accumulation,  120.  Employers  cannot  resist  competition 
by  combination,  121.  Must  have  the  reputation  of  pay- 
ing fair  wages,  121.     Violence  must  not  be  used,  122. 


CHAPTER   IV. 

VARIATION  OF  THE   RATE  OF   WAGES.  I7O 

Causes  of  the  varying  results  of  competition,  123.     First  cause, 
change  of  the  number  of  laborers  in  proportion  to  capital, 

124.  The  greater  the  capital  the  greater  the  demand  for 
laborers,  and  vice  versa,  124.  When  both  labor  and  cap- 
ital vary  wages  depend  on  the  ratio  of  one  to  the  other, 

125.  Employers  and  employes  not  natural  enemies,  125. 
Labor-saving  machinery  another  cause,  126.  Increases 
the  demand  for  labor,  126.  Chimerical  expectations,  127. 
Exception  for  agricultural  labor,  128.  Wages  vary  with 
the  cost  of  living,  129.  Not  merely  with  the  cost  of  the 
necessaries  of  life,  129. 


CHAPTER  V. 

CAUSES  OF  THE  VARIATION  OF  WAGES  FOR  PARTICULAR 

PERSONS    AND    CLASSES.  l8C 

First  raur.e,  diversity  of  natural  gift,  130.  Profits  of  eminent 
professional  men,  130.  Second  cause,  cost  of  acquiring 
skill,   131.     Wages  proportioned  to   skill,  131.     Third 


XU  CONTENTS. 

cause,  amount  of  confidence  reposed,  132.  Honor  of  po- 
sition reduces  wages,  132.  Numerous  causes,  133.  Ex- 
cessive competition  in  certain  occupations,  134.  Com- 
peting unit,  134.  Living  of  some  of  the  competitors  not 
at  stake,  134.  Obscure  and  subtle  causes  affect  wages, 
135.  Vicious  celibacy,  135.  Science  not  opposed  to 
marriage,  136.  Alleged  injustice  of  the  wages  of  women, 
137.  Said  to  receive  less  wages  for  the  same  work,  137. 
Why  not  pay  women  the  same  wages  as  men,  138.  Com- 
petition a  guide  to  one's  proper  occupation,  139.  Appli- 
cable to  the  Christian  Ministry,  139. 


CHAPTER  VI. 

OWNERSHIP  OF   LAND.  PAGE   igS 

Two  parties  in  distribution,  140.  Ownership  of  land  must 
depend  on  a  natural  law,  141.  Case  of  land  different  from 
that  of  air  and  water,'  142.  Nations  own  water  on  which 
they  bestow  labor,  142.  Ownership  of  land  acquired  by 
labor  bestowed,  143.  Not  merely  temporary,  143.  Gov- 
ernment title  not  procured  by  purchase  from  savages,  144. 
Savage  tribes  not  nations,  145.  Higher  law,  145.  What 
shall  be  done  with  the  Indian,  146.  Origin  of  the  gov- 
ernment title,  147.  Right  of  political  jurisdiction,  147. 
Objection  to  this  view.  Labor  of  subduing  land  said  to 
be  over  compensated,  148.  Not  true,  148.  Not  relevant 
if  true,  148.  Another  objection.  Prospective  enhance- 
ment of  value,  149.     Allowed  for  in  rent,  149. 


CHAPTER  VII. 

INTEREST.  20i| 

Gains  of  the  capitalist  are  either  interest,  rent  or  profit,  150. 
Interest  defined,  150.  Consists  of  two  elements,  150. 
Why  interest  must  be  paid,  151.  Legislative  interference 
with,    151.     A  violation  of  ownership,  151.     Controlic.l 


CONTENTS.  Xlll 

by  competition,  152.  Various  causes  of  fluctuation,  153. 
Tenure  of  land  affects  the  rate  of  interest,  153.  Different 
rates  in  different  countries,  154.  Declines  with  the  pro- 
gress of  civilization,  155.  Stationary  condition  of  capital 
not  to  be  apprehended,  156.  Demands  for  capital  in- 
versely as  the  rate  of  interest,  157.  Cosmopolitan  nature 
of  capital  sustains  the  rate  of  interest,  158.  Also  labor- 
saving  invention,  158. 


CHAPTER   VIII. 

RENT.  PAGE   2l8 

Rent  defined,  159.  No  risk  in  rent,  159.  Rent  less  than  in- 
terest without  risk.  Reason  why,  159.  Ricardo's  theory 
of  rent  stated,  160.  Rent  in  new  settlements,  161.  Rea- 
son why,  161.  Progress  of  cultivation,  162.  Fallacy  of 
Ricardo's  theory,  163.  Why  rent  rises  with  the  progress 
of  society,  164.  Law  of  diminishing  returns,  165.  Rent 
an  element  in  the  cost  of  agricultural  produce.  165a. 
Abolition  of  rent  impossible,  166.  Rent  offset  by  trans- 
portation, 167.  Fawcett's  admission,  168.  Same  fallacy 
applied  to  minerals,  169. 


CHAPTER   IX. 


23a 


Profit  defined,  170.  How  differs  from  interest,  170.  Rate  de- 
clines with  advancing  civilization,  T70.  Competition  the 
supreme  law,  171.  Rate  different  in  different  occupations, 
172.  Each  occupation  has  its  natural  rate  of  profit,  172. 
Combinations  of  capital  to  resist  competition,  173.  Free 
Trade  the  be.3t  antidote,  173.  Particular  combinations. 
Petroleum,  174.  Great  Railways,  175.  General  Railway 
law,  176.  Wisdom  of  the  managers  not  a  sufficient  public 
protection,  177.  Question  complicated  and  difficult,  17S. 
No  effectual  protection  against  such  combinations,  178. 
Great  advantages  of  large  combinations  of  capital,  179. 


XIV  CONTENTS. 


CHAPTER   X. 

UNDERLYING   CONDITIONS   OF   FREE   COMPETITION.      PAGE   215 

Three  conditions,  i8o.  First  condition,  freedom  of  exchange, 
especially  in  land,  i8o.  Required  by  the  law  of  owner- 
ship, i8i.  Limitation  of  it  injurious  to  both  parties,  iSl. 
Desire  of  the  agricultural  laborer  to  own  land,  182.  Life 
hopeless  without  it,  182.  Relative  profit  of  large  and 
small  farming,  183.  Comparison  of  English  and  Ameri- 
can tillage,  184.  Land  more  valuable  in  small  proprietor- 
ships, 184.  Why  the  number  of  holdings  in  England  is 
diminishing,  185.  Difficulty  of  the  question,  185.  Second 
condition,  intelligence  in  both  parties,  186.  Competition 
impossible  without  it,  186.  Relation  of  our  science  to 
public  education,  187.  Proper  limits  of  public  education, 
187.  Public  education  of  itself  not  sufficient,  188.  Agri- 
cultural population  of  New  England,  189.  Third  condi- 
tion, moral  integrity,  190. 


CHAPTER    XI. 

POPULATION.  261 

Malthus*  theory  of  population,  191.  False  in  practice,  192. 
Two  results  of  free  competition,  192.  First  result,  uni- 
versal dissemination  of  civilization,  193.  This  law  re- 
cently developed,  193.  English  colonization,  193.  Why 
this  law  was  little  known  in  antiquity,  194.  Not  mani- 
fested in  some  modern  nations,  194.  Depends  on  quality 
of  emigration,  195.  True  economic  lesson,  195.  Law 
applicable  to  capital,  196.  Second  result,  human  race 
propagated  from  best  specimens,  197.  Four  strata  in  civ- 
ilized society,  197.  First  and  second  contribute  little  to 
population,  198.  Fourth  class  contributes  little,  199. 
Population  chiefly  derived  from  the  third  class,  199. 
Conditions  most  favorable,  [99.  Propagates  the  highest 
civilization,  200.  The  law  of  wages  beneficent,  200. 
Darwin's  natural  selection,  200.  Future  of  the  human 
race  secured,  201. 


CONTENTS.  XV 


CHAPTER    XII. 

ECONOMIC  CONDITIONS  OF  GENERAL  PEACE.      PAGE   273 

Economic  importance  of  the  peace  of  the  world,  202.  De- 
graded masses  dangerous  to  internal  tranquillity,  203. 
Dangerous  to  international  harmony,  204.  All  must 
demand  and  expect  the  comforts  of  life,  205.  Strong  to 
repel  invasion,  weak  for  aggression,  205.  The  one  con- 
dition of  general  peace,  206. 


CHAPTER    XIII. 

SUBSTITUTES   FOR  COMPETITION.      SOCIALISM.  280 

Public  mind  unquiet.  Cooperation,  207.  Socialism,  pure  and 
simple,  207.  A  denial  of  our  fundamental  law,  208.  Mod- 
ified socialism  209.  Relies  on  competition  while  it  re- 
jects it,  2og.     Dispensing  with  the  services  of  middle  men, 

210.  Allowing  laborers  a  share  of  profits,  211.  The  true 
agricultural  cooperation,  211.     Education  not  sufficient, 

211.  Laborers  should  be  stockholders,  211.  True  coop- 
eration not  kindred  to  socialism,  212.  Competition  the 
only  hope  for  the  laborer,  212.  Abolition  of  private  own- 
ership of  land,  213.     National  bankruptcy  and  anarchy, 

213.  Logical  consequence  of  unjust  laws  of  land  tenure, 

214.  Should  government  find  employment  for  the  unem- 
ployed, 215.     Abolition  of  the  right  of  property,  215. 


CHAPTER   XIV. 

TAXATION.  295 

No  logical  place  for  it,  216.  Government  a  partner  in  all 
production,  216.  Protection  of  person  and  property  not 
the  only  political  function,  217.  Postal  service.  Streets, 
thoroughfares,  etc.,  217.  Local  taxation,  by  whom  levied, 
217.  Expense  of  public  education,  218.  Limits  of,  218. 
Care  of  the  unfortunate,  219.     How  far  gratuitous,  219. 


XVl  CONTENTS. 

State  must  protect  its  own  existence,  220.  Its  promises 
bind  individual  conscience,  220.  Abuse  of  the  power  of 
taxation,  221.  Mode  of  taxation,  222.  Revenue  duties, 
222.  Should  not  interfere  with  trade,  222.  Taxation  of 
debts,  223.  Creditor  should  pay,  224,  to  the  State  that 
protects,  224.     Dangers  of  excessive  taxation,  225. 


CHAPTER    XV. 

PAUPERISM.  PAGE   312 

An  anomaly.  No  logical  place  for  it,  226.  Always  attends 
civilization,  226.  No  modification  of  economic  law  can 
provide  for  it,  227.  Moral  forces  require  consideration. 
Inadequate,  228.  The  economist  insists  on  two  prohibi- 
tions. No  ownership  without  labor.  Men  must  not  be 
relieved  from  the  fear  of  want,  229.  Out-door  relief  to  be 
avoided,  230.  Relief  establishments  should  not  undersell 
in  the  market,  230.  Objections  to  out-door  aid,  231, 
Tend  to  increase  pauperism,  231.  Paupers  should  not  be 
voters,  231.  Relief  establishments  should  be  reforma- 
tories, 232.  Vicious  self-indulgence  should  be  restrained, 
232.  If  society  countenances  vices  it  should  support  the 
pauperism  they  produce,  233. 


CHAPTER    XVI. 

WASTEFUL    EXPENDITURE.  324 

Supplementary  topics,  234.  Necessary  and  disposable  pro- 
ducts, 235.  Stimulants  and  narcotics,  236.  In  great  de- 
mand, 236.  No  reasons  to  justify  this  vast  expenditure, 
237.  Eminently  dangerous,  237.  Economy  enters  no 
protest  against  the  love  of  the  beautiful,  238.  False 
modes  of  ornamentation,  238.  Fashion,  239.  Peculiarly 
potent  in  democratic  society,  240.  Subject  worthy  of  the 
consideration  of  the  wealthy,  240.  Adverse  to  correct 
taste,  241.  Under  freedom  the  people  arbiters  of  their 
own  destiny,  242.  Relation  to  national  character,  242. 
The  wealthy  not  to  lead  useless  lives,  243. 


CONTENTS.  XVll 


CHAPTER   XVII. 


PUBLIC  LIBERALITY.  PAGE   334 


Love  of  social  prosperity  a  natural  impulse,  244.  Laws  of  ex- 
change not  adequate  to  supply  all  social  want,  244.  Gov- 
ernments cannot  supply  them,  244.  Low  rate  of  interest 
favorable  to  public  liberality,  245.  Intelligence  of  the 
community  important  to  capital,  246.  The  rich  should  be 
voluntary  public  treasurers,  246.  Public  charities  not  to 
hold  land  by  inalienable  tenure,  247.  Higher  Institutions 
of  education  should  be  controlled  by  the  highest  culture, 
248.  Government  inadequate  to  it,  248.  Tendencies  of 
democratic  peoples  to  lavish  expenditure,  249.  Public 
liberality  the  remedy,  249.  Capital  so  used  not  with- 
drawn from  the  aid  of  labor,  249. 


"OP  THl       * 

^UKIVSHSITTj 

INTRODUCTION. 


FIRST    PRINCIPLES. 

§  I.  The  science  we  are  about  to  expound,  is  the 
logical  development  and  application  to  a  special  group 
of  phenomena,  of  a  single  law  of  nature,  as  truly  as 
physical  astronomy  is  the  logical  development  and  ap- 
plication to  the  phenomena  of  the  solar  system,  of  the 
law  of  gravitation.  The  law  of  nature  to  which  we 
refer  may  be  thus  enunciated  : 

Every  man  owns  himself^  and  all  which  he  produces 
by  the  voluntary  exertion  of  his  own  powers. 

Every  science  must  assume  something.  Ours  must 
assume  that  the  idea  of  ownership  is  perfectly  clear 
and  intelligible  to  every  one.  It  is  a  simple  intuition, 
which  originates  in  the  spontaneous  action  of  every 
human  mind,  and  is  therefore  undefinable.  It  ranks  in 
this  respect  with  the  idea  of  personality,  of  moral  obli- 
gation and  of  causation.  As  the  being  we  call  self  is 
conscious  of  its  own  wants,  and  exerts  its  own  powers 
to  supply  them,  it  necessarily  discerns  the  idea  of  pos- 
session, and  begins  to  understand  the  meaning  of  pos- 
sessive pronouns  and  learns  correctly  to  apply  them. 

§  2.  This  is  our  only  idea  of  ownership.  You 
cannot  convince  any  human  being,  that  another  per- 
son may  properly  claim  the  possession  of  any  thing 
as  exclusively  his  own,  unless  his  claim  can  be  traced 
back  to  an  origin  in  the  natural  law  just  enunciated 


a  ECONOMICS. 

If  it  can  be  so  traced  back,  no  man  in  his  senses  wib 
call  in  question  its  validity.  The  ownership  may 
have  passed  by  voluntary  gift  or  exchange,  the  nature 
of  which  transaction  will  hereafter  be  explained, 
through  many  hands ;  but  if  the  ownership  really  ex- 
ists, it  must  have  been  originally  acquired  by  the  exer- 
tion of  some  one's  individual  powers,  to  render  the 
thing  claimed  serviceable  to  human  well-being.  The 
human  mind  instinctively  discerns  that  in  this  way  ab- 
solute ownership  is  acquired,  and  that  the  acquisition  of 
any  real  ownership  in  any  other  way  is  impossible. 
The  powers  of  nature  are  the  free  gift  of  God  to  all, 
and  cannot  be  possessed.  All  those  objects  whereby 
man's  wants  are  capable  of  being  supplied  by  his  own 
superadded  efforts,  are  given  in  impartial  liberality  alike 
to  all.  The  air,  the  water,  the  land,  the  spontaneous 
productions  of  the  earth,  the  primeval  forest,  the  game, 
the  wild  fruits  are  free  to  all.  It  is  only  when  man  has 
put  forth  his  own  efforts  to  render  that  helpful  to  hu- 
man weH  being  which  was  not  so  before,  that  the  idea 
of  ownership  arises.  Man's  indisputable  claim  to  the 
results  of  his  own  exerted  powers  carries  along  with  it 
the  material  substance  which  by  his  exertion  has  been 
made  fit  for  human  use.  The  wild  fruits  as  they  hang 
upon  the  bush  can  be  owned  by  no  one.  He  who 
gathers  them,  by  gathering  becomes  their  owner.  The 
nugget  of  gold  that  lies  on  the  surface  in  some  seques- 
tered gorge  of  the  mountains  has  no  owner,  any  more 
than  the  atmospheric  air  which  circulates  around  it. 
He  who  has  made  a  journey  to  those  unfrequented  re- 
gions of  desolation,  discovered  and  picked  up  the  pre- 
cious thing,  and  carried  it  to  the  haunts  of  men,  has 
become  its  owner,  however  great  its  value,  just  as  he 
owned  the  ripe  blackberry  as  soon  as  he  had  plucked  it 
from  its  native  bush.     He  who  has  entered  on  land 


INTRODUCTION.  3 

never  before  subjected  to  human  culture,  has  acquired 
the  possession  of  all  which  by  his  own  toil  he  has  sub- 
dued and  rendered  capable  of  producing  food  for  man. 
The  savage  who  for  generations  roamed  over  it  in  pur- 
suit of  game,  and  lived  on  its  spontaneous  productions, 
acquired  no  ownership,  because  he  did  nothing  to  in- 
crease its  capability  of  supplying  human  want.  We  do 
not  expect  to  obtain  full  credence  for  these  proposi- 
tions without  further  proof  than  we  can  give  in  these 
preliminary  statements.  As  we  proceed  in  the  devel- 
opment of  the  subject,  there  will  be  occasion  more 
fully  to  illustrate  and  substantiate  the  principle.  It  is 
only  appropriate  here  to  give  it  its  place  among  the 
fundamental  principles  of  the  science. 

All  ownership  of  material  things  consists  essentially  in 
our  unquestioned  claim  to  possess  and  enjoy  the  results  of 
that  labor  which  we  have  expended  upon  them. 

§  3.  Two  distinct  sciences  result  from  the  develop- 
ment and  application  of  this  natural  law.  The  being 
that  owns  these  powers  is  capable  of  moral  obligation, 
and  is  a  subject  of  moral  law.  To  point  out  the  moral 
laws  to  which  he  is  amenable  in  the  exercise  of  these 
powers,  is  the  sphere  of  the  science  of  ethics.  To 
develop  the  same  fundamental  law  in  the  direction  ot 
the  multiplication  and  exchange  of  objects  fitted  to 
satisfy  human  desire,  and  the  distribution  of  them 
among  all  those  who  cooperate  in  their  production,  is 
the  sphere  of  the  science  we  are  proposing  to  expound. 

In  constructing  a  system  of  science,  it  is  necessary 
first  to  draw  its  extreme  bounding  lines.  This  can 
only  be  done  by  forming  a  comprehensive  concept, 
vfhich  shall  embrace  precisely  and  only  all  the  phe- 
nomena with  which  the  science  is  to  deal.  We  think 
that  writers  on  our  science  have  often  failed  to  do  this, 
and  that  much  of  the  vagueness  and  indefiniteness  with 


4  ECONOMICS. 

which  it  is  charged  is  due  to  this  cause.  For  the  ex- 
pression of  that  comprehensive  concept  we  select  the 
word  wealth.  We  propose  to  write  a  treatise  on  the 
science  of  wealth.  We  must  therefore  define  that 
word. 

At  the  present  stage  of  our  inquiries,  we  can  scarcely 
afford  space  for  any  controversy  with  those  who  think 
with  Professor  Perry,  that  it  is  impossible  to  frame  any 
definition  of  wealth  which  will  render  the  wo'rd  fit  for 
scientific  use.  Professor  Perry  has  written  a  book 
which  contains  much  clear  thought  and  instructive 
suggestion.  But  it  greatly  lacks  the  scientific  char- 
acter, precisely  for  the  reason  that,  instead  of  applying 
his  acute  mind  to  the  definition  of  wealth,  he  has  writ- 
ten about  it  without  defining  it.  It  is  of  no  avail  to  say 
that  the  meaning  of  the  word  is  unsettled.  That  only 
shows  that  it  is  necessary  to  settle  it.  The  science 
itself  will  always  be  to  a  greater  or  less  extent  vague 
and  indefinite,  unworthy  to  be  called  a  science,  till  the 
precise  meaning  of  that  word  is  determined  by  accurate 
definition.  If  the  word  wealth  cannot  be  defined,  then 
the  science  of  wealth  is  simply  impossible.  Nor  do  we 
escape  the  difficulty  by  adopting  Archbishop  Whate- 
ly*s  definition  of  the  science, — "the  science  of  ex- 
change." We  must  still  meet  the  question,  what  is 
wealth  ?  for  to  wealth  only  is  exchange  applicable.  We 
give  therefore  the  following : 

Definition,  Wealth  is  anything  which  can  be  owned 
and  exchanged  for  an  equivalent. 

This  definition  embraces. 

First,  All  human  powers  to  adapt  the  materials  of 
the  world  to  the  satisfaction  of  human  desire  by  vol- 
untary effort ;  for  the  scare  owned  and  can  be  exchanged 
for  an  equivalent.  A  man  can  exchange  his  power  tc 
produce  such  changes,  for  a  day,  for  a  year,  for  a  life- 


INTRODUCTION.  5 

time,  for  so  many  dollars,  or  for  so  much  of  any  other 
desirable  thing  as  may  be  agreed  on  between  himself 
and  the  other  party  to  the  exchange. 

Second,  All  tools,  instruments  and  machines  by 
which  human  labor  is  assisted. 

Third,  All  objects  which  have  been  rendered  capa- 
ble by  human  effort  of  gratifying  human  desire,  which 
remain  at  any  time  unconsumed,  whether  the  process 
of  fitting  them  for  human  use  is  completed,  or  in  pro- 
gress. Into  precisely  these  three  classes  all  wealth  is 
divisible,  and  into  one  of  them  every  thing  of  which  the 
science  properly  treats  will  naturally  fall. 

§  4.  If  to  this  definition  it  is  objected  that  the 
word  wealth  is  not  ordinarily  employed  in  so  com- 
prehensive a  sense,  the  fact  is  admitted,  but  it  is 
denied  that  this  is  any  valid  objection  to  the  defini- 
tion. In  many  sciences  we  are  under  the  neces- 
sity of  employing  technical  terms  as  comprehensive 
concepts  of  the  phenomena  with  which  any  science 
has  to  do,  which  terms  do  not  agree  in  the  extent  of 
their  meaning  with  any  terms  which  are  in  popular  use. 
The  popular  mind  has  never  formed  that  precise  group 
of  ideas  with  which  the  science  has  to  do,  and  there- 
fore has  no  term  which  expresses  it.  In  every  such 
case  we  have  our  choice  of  two  expedients,  either  to 
select  a  new  term  not  in  popular  use,  more  commonly 
derived  from  the  storehouse  of  classical  learning,  or  to 
choose  a  word  in  popular  use  which  comes  nearest  to 
the  desired  meaning,  and  then  limit  it  by  a  definition  to 
a  precise  technical  import.  In  the  moral  and  social 
sciences  we  have  for  the  most  part  pursued  the  course 
last  indicated.  Thus  in  Psychology  the  term  percep- 
tion is  almost  never  used  in  popular  speech  in  that 
precise  meaning  in  which  it  is  employed  to  express  the 
acquisition  of  a  knowledge  of  the  material  world  through 


6  ECONOMICS. 

the  senses.  We  have  in  this  case  selected  a  word  from 
popular  speech,  and  by  a  definition  invested  it  with  a 
precise  technical  meaning  which  it  does  not  bear  in 
common  use.  Precisely  such  liberty  has  been  taken 
with  the  word  wealth  in  our  definition.  Such  a  use  of 
words  finds  innumerable  justifications  in  all  the  moral 
and  social  sciences. 

§  5.  If  it  is  further  objected  to  our  definition  of 
wealth,  that  it  arranges  in  the  same  class  things  that 
are  incongruous-,  that  it  embraces  in  the  same  genus 
things  which  have  no  generic  likeness,  as  for  example 
the  wealth  produced  and  the  powers  by  which  it  is  pro- 
duced, our  answer  is,  that  the  things  referred  to  are  not 
incongruous,  that  they  are  united  by  true  generic  re- 
semblances. They  are  alike  in  the  two  generic  char- 
acteristics, that  they  are  capable  of  being  owned  and 
capable  of  being  exchanged.  The  reason  why  so  much 
difficulty  has  been  experienced  in  defining  this  word  is, 
that  men  have  failed  to  notice  that  these  are  the  true 
characteristics  of  the  genus,  and  that  they  pertain  alike 
to  all  which  we  have  comprehended  in  our  definition. 
Nothing  is  more  common  than  such  an  occurrence  as 
the  following.  One  man  has  accumulated  results  of 
labor  which  he  wishes  to  employ  in  trade.  But  he  is 
infirm  with  age  or  otherwise  incapacitated  for  exerting 
the  active  force  which  the  business  requires.  He  is 
therefore  quite  willing  to  enter  into  a  partnership,  on 
equal  terms,  with  some  one  who  possesses  the  requisite 
business  efficiency,  regarding  the  active  powers  of  his 
partner  as  a  full  equivalent  for  the  accumulated  results 
of  his  own  previous  activity.  One  partner  is  just  as 
rich  in  present  active  power,  as  the  other  is  in  accumu- 
lations of  wealth.  The  two  are  regarded  as  perfectly 
homogeneous,  and  the  one  is  freely  exchanged  for  the 
other.     If  one  of  them  is  properly  called  wealth,  why 


INTRODUCTION.  7 

not  the  other?    Examples  involving  and  demonstrating 
the  same  principle  are  Innumerable. 

§  6.  The  word  labor  will  be  of  frequent  occurrence 
in  this  treatise.     We  therefore  propose  the  following: 

Definition,  Labor  is  the  exertion  of  man's  natural 
powers^  for  the  purpose  of  producing  such  changes  as 
conduce  to  the  gratification  of  human  desire  and  the  sup^ 
ply  of  hu7nan  want. 

All  labor  is  divisible  into  two  classes,  viz : 

First,  That  which  is  employed  in  constructing  the 
implements  and  machines  by  which  labor  is  aided  and 
Tendered  efficient,  and, 

Second,  That  which  is  employed  in  producing 
changes  whereby  desire  is  directly  gratified. 

§  7.  The  science  of  which  we  propose  to  treat  is 
usually  called  Political  Economy.  To  this  name  there 
are  grave  objections.  We  cannot  help  thinking  that 
the  continued  use  of  this  name  is  a  standing  proof,  that 
the  aim  of  the  science  has  been  to  a  certain  extent  mis- 
directed. The  name  seems  to  suggest  the  idea,  that  the 
object  of  the  science  is  to  promote  the  wealth  of  the 
nation,  that  it  always  has  special  reference  to  the  polit- 
ical divisions  of  the  world,  to  those  lines  which  are  the 
conventional  boundaries  of  nations.  Some  such  idea 
seems  to  have  been  in  the  mind  of  Adam  Smith,  the 
father  of  the  science,  and  to  have  induced  him  to  choose 
for  the  title  of  his  great  work,  "  The  Wealth  of  Nations." 
A  recent  writer  on  the  subject.  Professor  Bowen,  has 
chosen  for  the  title  of  his  book,  "American  Political 
Economy."  In  just  so  far  as  this  idea  of  nationality 
has  possession  of  the  mind  of  the  writer,  it  tends  to  a 
distorted  and  erroneous  view  of  the  subject.  All  this 
is  as  inappropriate  as  to  speak  of  national  Ethics,  or 
American  Astronomy.  Science  is  not  national  or  poli- 
tical.   It  is  Universal.    It  is  Human.    Economy  means, 


8  FCONOMICS. 

the  law  of  the  household,  the  family.  There  is  a  Human 
Family.  "  All  ye  are  brethren."  The  Science  of  which 
we  are  to  treat  embraces  that  whole  family,  as  truly  as 
Ethics  does,  as  truly  as  Astronomy  gives  us  the  science 
of  the  heavenly  bodies,  however  separated  from  each 
other  in  immensity.  We  claim  for  the  science  its  place 
among  the  universal  sciences,  like  Ethics,  Esthetics, 
Physics.  Following  the  analogy  according  to  which 
these  names  are  constructed,  we  claim  for  our  science 
the  name  Economics.     We  give  the  following : 

Definition,  Economics  is  the  Science  of  Wealth. 

§  8.  As  all  wealth  is  either  power  to  labor  or  the 
product  of  labor  performed,  and  as  power  to  labor  is 
profitless  unless  it  is  exerted,  our  first  inquiries  will  be, 
— what  are  those  forces  in  human  nature  itself  by 
which  man  is  excited  to  exertion,  and  what  are  those 
devices  and  arrangements  by  which  his  natural  powers 
are  aided  and  rendered  efficient  1  The  first  part  of 
our  science  is  concerned  with  these  inquiries,  and  is 
called  Production. 

As  it  will  appear  in  the  progress  of  this  work,  that 
for  the  most  part  one  man  produces  only  one  or  at 
most  a  very  few  things,  and  must  therefore  supply  his 
own  multifarious  wants  by  exchanging  his  products  for 
the  products  of  other  men,  it  will  be  necessary  to  show 
how  the  law  of  exchange  grows  out  of  the  law  of 
ownership,  and  to  explain  the  principal  arrangements 
by  which  exchange  is  facilitated,  and  the  natural  law 
according  to  which  it  is  conducted.  This  second  part 
of  the  science  is  called  Exchange. 

As  the  whole  human  race  is  employed  in  greater  ol 
less  degree  in  producing  wealth,  and  must  have  a  share 
in  the  wealth  produced,  or  perish,  we  must  expound 
those  natural  laws  by  which  it  is  determined  in  what 
proportion  the  wealth  of  the  world  is  distributed  among 


INTRODUCTION.  5 

all  those  who  are  concerned  in  its  production.  The 
third  part  of  the  science  is  devoted  to  the  consideration 
of  these  laws,  and  is  called  Distribution. 

To  these  it  is  customary  to  add  a  fourth  part  called 
Consumption.  In  it  are  explained  the  principles  which 
regulate  the  application  of  wealth  to  the  gratification 
of  human  desire,  and  the  promotion  of  human  well- 
being.  But  logically  regarded,  this  fourth  part  of  the 
science  opens  up  the  whole  science  of  ethics.  To  pur- 
sue the  subject  exhaustively,  we  must  inquire  what  is 
the  destiny  of  man,  for  we  cannot  judge  what  man 
needs  except  in  view  of  the  destiny  for  which  he  was 
made.  Having  settled  this  question,  it  would  next  be 
incumbent  on  us  to  inquire  by  what  application  of  his 
powers,  he  may  most  surely  and  completely  attain  this 
destiny.  To  pursue  these  inquiries  by  an  exhaustive 
logic,  would  be  to  construct  the  science  of  ethics. 

§  8  ^.  In  affirming  that  the  Science  of  Economics  is 
only  a  development  of  the  single  law  enunciated 
above,  we  are  not  to  be  understood  to  assert,  that  the 
science  so  constructed  is  comprehensive  of  all  the 
actual  economic  phenomena  of  the  world  as  it  is ;  but 
only  that,  if  the  laws  of  human  nature  were  uncounter- 
acted,  either  by  government  or  vicious  custom,  and 
thus  left  free  to  work  out  their  own  proper  results, 
those  results  would  be  in  perfect  conformity  with  the 
science  thus  evolved.  This  distinction  is  constantly 
recognized  in  this  treatise,  and  if  in  any  instance  it  is 
not  formally  stated,  it  is  to  be  regarded  as  assumed  and 
implied.  It  is  our  business  as  economists,  not  to  point 
out  a  law  which  actually  does  regulate  the  economics 
of  all  peoples,  but  to  show  how  the  laws  of  human 
nature,  when  not  viciously  counteracted,  would  regulate 
them ;  and  as  far  as  may  be,  in  cases  where  abnormal 
results  exist,  to  discover  the  causes  by  which  the  mis- 
I* 


10  ECONOMICS. 

chief  is  wrought,  and  to  suggest  the  needed  economic 
remedies. 

The  enlightened  economist  will  be  quite  ready  to 
admit,  that  there  are  conditions  of  the  successful  work- 
ing of  the  economic  forces,  which  lie  quite  outside  of 
his  science.  The  intellectual  and  moral  soundness  of 
the  individuals  and  the  communities  working  these 
forces  are  such  conditions.  If  we  have  to  do  with 
masses  of  men,  in  whom  the  intellect  is  deeply  clouded 
by  ignorance  and  superstition,  and  the  moralities  of 
life  disregarded  or  unknown,  economic  science  is  im- 
possible. That  science  always  implies  men,  not  brutes 
in  human  form, — civilized  men,  not  barbarians, — men 
that  know  and  obey  the  moral  laws  of  human  life. 
When  we  assert  the  universality  of  economic  laws,  we 
are  not  to  be  supposed  to  deny,  or  to  be  forgetful  of 
these  truths.  But  the  existence  of  these  truths  can  in 
no  degree  modify  the  development  of  economic  laws, 
or  detract  any  thing  from  the  universality,  or  from  the 
dignity  or  importance  of  the  science. 


PART   I 


PRODUCTION. 


CHAPTER  I. 

Stimuli  to  Labor. 

§  9.  It  is  the  object  of  this  chapter,  to  inquire  what 
that  is  in  the  constitution  of  man  that  makes  him  the 
only  laborer  that  inhabits  this  world.  The  lower  orders 
of  the  creation  cannot  be  said  with  any  propriety  to 
Itbor.  All  labor  implies  intelligent  purpose.  Man 
does  not  merely  catch  or  gather  his  supplies.  For  the 
most  part  he  makes  them.  He  imparts  to  the  materials 
which  nature  provides  qualities  which  they  did  not 
possess  before,  and  thus  fits  them  for  his  use.  By  the 
combined  agency  of  the  atmosphere,  the  sunshine  and 
the  land,  he  produces  the  materials  of  food  and  cloth- 
ing. Nothing  but  air  and  water  and  sunshine  is  found 
in  a  condition  fit  for  his  use.  All  else  he  makes  fit  by 
the  exertion  of  his  powers  under  the  control  of  a  rational 
soul.  All  the  lower  animals  use  nature  as  they  find  it. 
They  gather,  some  of  them  store  up,  but  they  never  fit 
it  for  their  use.  Man  begins  where  all  other  animals 
end.  He,  like  them,  takes  from  nature  what  she  fur- 
nishes, but  unlike  them,  he  fits  it  for  his  use  by  rational 


1 2  ECONOMICS. 

effort.  This  only  is  labor.  The  first  condition  then  of 
the  performance  of  labor  is  the  existence  of  a  ratiofiai 
soul.     Labor  is  not  mere  effort,  it  is  rational  effort. 

§  lo.  The  second  stimulus  to  labor  which  we  notice 
is  the  ii?ipulse  of  the  appetites  of  hunger^  thirst  and  sex. 
The  two  former  have  for  their  object  the  preservation 
of  individual  life  and  health ;  the  latter,  the  perpetua- 
tion of  the  race.  So  important  are  these  two  objects 
that  they  are  provided  for  by  implanting  in  our  very 
constitution  impulses  of  appetite,  so  strong  as  to  insure 
the  end,  without  any  experience  or  consideration  of 
necessity.  Men  are  driven  to  the  satisfaction  of  these 
appetites  without  any  thought  of  the  necessity  of  such 
gratification  to  the  preservation  of  their  own  lives,  or 
the  perpetuity  of  the  race.  So  imperative  are  they 
that  they  compel  a  certain  amount  of  labor  even  from 
the  most  indolent  and  degraded  savage. 

Men  work,  not  like  the  bee  or  the  beaver,  from  a 
direct  impulse  to  work,  but  from  a  perceived  necessity 
of  working  that  they  may  have  something  to  eat.  The 
beaver  is  impelled  to  build  his  dam  just  as  the  man  is 
impelled  to  eat  his  food  when  it  is  made  ready  to  his 
hand.  The  bee  and  the  beaver  will  work  though 
relieved  from  all  necessity.  Relieve  man  from  the 
pressure  of  the  necessity  of  working  that  he  may  escape 
starvation,  and  he  would  never  work  at  all.  This  is  a 
law  of  human  nature  of  which  the  economist  must 
never  lose  sight. 

§  II.  Another  stimulus  to  labor  is  found  in  certain 
needs  of  the  human  body  which  man  learns  only  by  expe^ 
rience.  These  are  the  need  of  shelter  from  the  storm, 
from  the  cold  of  winter,  and  from  the  burning  sun  of 
summer,  and  of  clothing  suited  to  the  season  of  the 
year.  These  wants  are  not  like  those  of  the  bodily 
appetites  constant  and  regularly  recurring,  but  vary 


STIMULI    TO   LABOR.  I3 

indefinitely  with  climate,  season  and  weather ;  and  are 
provided  for  by  no  impulse  of  appetite.  We  are  driven 
to  provide  for  them  only  by  experience  of  their  urgency, 
and  the  more  human  nature  is  cultivated  and  developed, 
the  more  urgent  and  cogent  these  needs  become.  They 
are  a  no  less  natural  stimulus  to  labor  than  the  impulse 
of  appetite.  Apparently  the  only  reason  why  they  are 
not  provided  for  by  such  special  impulses,  as  in  the 
case  of  the  bird,  is  that  in  all  man's  vast  variety  of  cir- 
cumstances and  conditions,  no  impulse  acting  by  a 
uniform  and  unvarying  law,  like  the  appetite  of  hunger, 
could  have  answered  the  purpose.  Such  an  appetite 
would  have  been  too  strong  in  one  climate,  and  too 
weak  in  another. 

§  12.  Another  very  important  stimulus  to  labor  is 
found  in  man's  love  of  acquisition  and  ownership.  It  is 
difficult  fully  to  conceive  the  power  of  this  principle  in 
our  constitution,  and  its  fitness  to  qualify  man  for  his 
social  destiny.  Even  in  an  isolated  and  savage  exist- 
ence, man's  condition  without  any  accumulation  of 
the  results  of  labor  would  be  exceedingly  precarious 
and  wretched.  But  it  is  only  when  we  view  man  in 
the  social  condition  to  which  he  is  destined,  that  the 
importance  of  this  provision  becomes  fully  apparent. 
Without  vast  accumulations  of  wealth  civilization  is 
impossible.  The  most  superficial  inspection  of  any 
civilized  community  will  convince  any  one  of  this. 
Farms  under  high  cultivation,  tools  and  machines  for 
facilitating  labor,  roads,  ships  and  railways  are  only  a 
few  of  the  conditions  of  civilization  which  depend  for 
their  existence  on  vast  accumulations  of  wealth.  There 
is  a  very  close  analogy  between  the  strong  love  of  own- 
ership implanted  in  man's  nature  as  a  provision  for  this 
great  social  want,  and  the  appetites  already  considered 
as  a  provision  for  the  preservation  of  the  individual  man 


14  ECONOMICS. 

and  of  the  race.  Perhaps  men  might  have  accumu- 
lated  wealth  from  a  mere  conviction  founded  on  expe- 
rience of  the  necessity  of  it  to  social  well-being ;  but 
in  that  case  the  conditions  of  society  must  have  been 
very  uncertain,  and  its  progress  very  slow  and  toil- 
some. We  sometimes  denounce  the  greed  of  gain,  and 
perhaps  not  without  reason  in  particular  cases ;  for 
nothing  can  be  meaner  than  a  life  spent  under  the  su- 
preme control  of  the  love  of  money.  But  on  the  whole 
the  desire  of  gain  is  not  too  strong  in  human  nature. 
It  is  one  of  the  most  beneficent  provisions  of  the  Crea- 
tor, and  the  economist  should  be  foremost  to  condemn 
all  arrangements  which  tend  to  restrain  the  freedom  of 
its  action. 

§  13,  Another  stimulus  to  labor  is  the  love  of  the 
beautiful.  This  is  a  factor  in  our  science  of  the  im- 
portance of  which  many  writers  have  not  been  fully 
aware.  Some  men  who  ought  to  know  better  inveigh 
against  those  artificial  wants  which  men  experience  in 
civilized  life,  as  though  all  which  is  expended  in  satis- 
fying them,  were  so  much  withdrawn  from  the  wealth 
of  the  community.  This  is  simply  objecting  to  all 
which  distinguishes  civilized  man  from  a  horde  of  sav- 
ages, or  human  society  from  a  herd  of  brute  animals. 
What  such  men  have  to  say  about  natural  in  distinc- 
tion from  artificial  wants  probably  has  reference  to 
those  wants  which  pertain  to  the  support  of  life  and 
the  perpetuity  of  the  race.  They  only  are  provided 
for  by  appetite  and  animal  instinct.  If  these  only 
were  considered  and  their  gratification  provided  for, 
there  could  be  no  science  of  economics.  The  condi- 
tion of  a  gregarious  herd  of  animals,  or  the  lowest  stage 
of  barbarism  in  savage  life  would  be  all  that  man  could 
attain  to.  Here  is  no  field  for  social  science.  What 
are  called  the  artificial  wants  of  men  are  no  less  natu. 


STIMULI    TO    LABOR.  ic 

ral  than  those  to  which  we  are  impelled  by  natural  ap- 
petite. They  differ  from  them,  not  in  being  less  indi- 
cated by  nature,  but  in  being  discoverable  only  by  the 
rational  use  of  the  intellect. 

Another  stimulus  to  labor  and  the  highest  of  all  is 
the  love  of  humanity.  It  is  often  disguised  and  over- 
laid by  the  appetites  and  the  love  of  gain,  until  it  seems 
to  have  quite  disappeared  from  the  human  soul.  But 
it  is  only  in  appearance.  It  is  as  truly  an  original  and 
universal  law  of  human  nature  as  the  appetite  of  hun- 
ger, and  in  proportion  as  man  individual  and  social  is 
developed  and  cultivated,  it  exerts  a  greater  and  more 
apparent  influence  on  all  human  activities.  It  is  the 
organic  force  in  all  society,  and  to  give  it  controlling 
power  over  the  individual  man  is  the  end  to  be  aimed 
at  in  the  formation  of  character.  It  is  therefore  not 
only  entitled  to  a  place,  but  to  a  foremost  place  among 
the  stimuli  to  human  labor. 

§  14.  In  order  that  man  may  feel  the  full  stimulus 
to  labor  which  exists  in  his  constitution,  it  is  needful 
that  his  whole  nature  should  be  brought  into  active 
development ;  not  only  those  appetites  which  he  shares 
with  the  brute  creation,  not  only  the  consciousness  of 
those  needs  which  are  common  to  him  with  the  savage, 
but  those  propensities  which  belong  to  him  as  a  being 
capable  of  foresight  and  calculation,  and  those  tastes 
which  raise  him  to  the  dignity  of  an  esthetic  and  a  moral 
being. 

The  economist  must  meet  the  question  how  human 
labor  can  all  be  called  into  the  most  energetic  demand. 
Otherwise  men  will  be  more  indolent  but  certainly  not 
richer.  Let  us  suppose  that  the  only  mode  of  employ- 
ing human  labor  were  for  the  supply  of  the  bare  neces- 
saries of  life.  In  such  a  case,  a  large  portion  of  man's 
power  to  labor  would  remain  forever  uncalled  for  and 


1 6  ECONOMICS. 

unexerted.  The  human  race  is  not  constituted  for  such 
a  mode  of  life.  Man  has  vast  powers  and  capabilities 
for  which,  in  such  a  mode  of  life,  he  would  have  no  use, 
and  from  which  he  could  never  derive  any  advantage. 
Nearly  the  same  result  will  follow,  if  a  large  portion  of 
the  community  do  not  enjoy  and  have  no  hope  of  enjoy- 
ing any  thing  beyond  the  same  bare  necessaries,  though 
a  favored  few  do  enjoy  all  the  advantages  of  a  civilized 
existence.  Obviously  the  demand  for  labor  in  such  a 
community  would  fall  below  its  natural  intensity,  by  the 
precise  amount  of  all  the  labor  which  must  be  exerted  to 
supply  the  unsupplied  wants  of  all  those  who  are  re- 
duced to  the  necessity  of  subsisting  on  bare  necessaries. 
It  may  indeed  be  true,  that  these  depressed  classes  may, 
as  in  certain  classes  of  laborers  in  England  and  still 
more  in  Ireland,  find  their  labor  all  demanded  in  pro- 
ducing something  which  is  to  find  a  market  in  other 
lands.  But  in  that  case  it  is  only  necessary  to  remem- 
ber, that  wealth  is  not  a  national  but  a  human  phenome- 
non. It  will  then  become  apparent  that,  over  the  whole 
earth,  the  stimulus  to  labor  is  impaired  just  in  propor- 
tion as  any  portion  of  the  human  race,  no  matter  within 
what  nationality,  is  reduced  to  the  necessity  of  subsisting 
on  bare  necessaries. 

§  15.  Hence  it  appears  evident  that  the  stimulus  to 
human  labor  throughout  the  world  will  be  increased  or 
diminished,  according  as  a  greater  or  less  proportion  of 
the  human  race  attain  to  the  satisfaction  of  those  ivants 
which  arc  commonly  called  artificial^  i.  e.,  those  wants 
of  which  we  become  conscious  only  through  an  active 
and  cultivated  intellect.  All  which  adorns  and  beau- 
tifies life  is  of  this  character. 

This  perfectly  agrees  with  the  observed  facts  of 
human  experience.  The  savage  does  not  labor  because 
lie  has  no  artificial  wants.     His  love  of  the  beautiful 


STIMULI   TO   LABOR.  1 7 

aspires  to  nothing  higher  than  the  gaudiest  feathers 
which  he  can  pluck  from  the  birds  he  kills  for  food,  or 
a  few  daubs  of  paint  derived  from  the  colored  earths 
he  chances  to  discover  in  his  wanderings.  The  coarsest 
food  and  clothing  and  the  rudest  shelter  from  the  sun 
and  the  cold  are  the  only  gratifications  to  which  he 
aspires.  Neither  does  he  furnish  any  market  for  the 
beautiful  products  of  more  civilized  peoples.  If  Amer- 
ica were  reduced  to  the  condition  in  which  Columbus 
found  it,  England  herself  would  find  no  buyers  for  a 
large  portion  of  what  she  produces,  and  must  recede  in 
wealth  and  prosperity  far  back  toward  the  condition  in 
which  she  was  three  hundred  years  ago. 

Communities  which  are  separated  from  the  rest  of 
the  world  by  an  insular  position  or  by  barriers  of  moun- 
tains, often  acquire  very  slowly  a  knowledge  of  the 
progress  of  invention  in  the  arts  which  adorn  and  beau- 
tify society.  Such  communities  do  not  advance  in 
wealth  more  but  much  less  rapidly  than  those  nations 
which  are  always  abreast  of  the  progress  of  invention, 
and  enjoy  all  its  refinements  and  beauties.  If  you 
would  quicken  the  activity  and  increase  the  prosperity 
of  such  an  isolated  community,  you  must  multiply  their 
artificial  wants.  The  theory  that  profuse  consumption 
is  the  source  of  prosperity  is  absurd  and  mischievous 
enough,  and  yet  it  has  in  it  an  element  of  truth  which 
many  economists  have  sadly  overlooked. 

A  sound  and  true  culture  of  the  whole  nature  of 
man  is  a  most  important  condition  of  the  highest  activ- 
ity of  human  labor.  It  is  also  of  great  importance  that 
the  civilizing  forces  should  be  applied  to  all  portions 
of  the  community  instead  of  being  limited  to  a  favored 
few.  The  economist  is  most  intensely  interested  in  so 
constructing  society,  that  as  far  as  possible,  every  por- 
tion  of  the  human  race  shall  aspire  to  and  actually 


l8  ECONOMICS. 

enjoy  a  civilized  life,  that  there  shall  remain  no  out  of 
the  way  places,  no  dark  corners  where  barbarism  can 
be  hid  away  and  concealed  amid  surroundings  that  are 
all  radiant  with  beauty.  How  far  this  ideal  of  the 
economist  can  be  realized  in  the  actual  condition  of 
society,  we  shall  not  be  prepared  to  judge,  till  we  have 
considered  those  great  natural  laws  which  determine 
the  distribution  of  wealth  among  those  who  are  con- 
cerned in  producing  it. 

§  1 6.  It  is  obvious  that  none  of  these  stimuli  to 
labor  can  have  much  beneficial  influence,  unless  men 
can  in  fact  own  and  enjoy  the  products  of  their  own 
labor.  It  is  also  evident  that  in  all  communities,  there 
are  men  who  would  rather  live  by  theft,  robbery  and 
fraud,  than  by  their  own  honest  labor.  Our  science 
therefore  recognizes  the  necessity  of  the  existence  and 
all  pervading  influence  of  just,  equitable  and  enlight- 
ened civil  government,  to  protect  every  man  in  the 
enjoyment  of  the  results  of  his  own  labor,  against  the 
violence  and  fraud  of  every  other.  Without  the  per- 
vading presence  and  active  efficiency  of  such  a  govern- 
ment, there  can  be  no  efl"ective  stimulus  to  labor  and 
economic  prosperity.  Just  in  proportion  as  the  laws 
of  any  country  respecting  property  or  the  taxation  of 
property  are  in  contravention  of  the  natural  law  oi 
ownership,  as  it  has  been  already  expounded ;  or  the 
government  fails  to  protect  the  individual  in  the  full 
enjoyment  of  the  products  of  his  own  labor,  and  of  all 
the  property  rights  which  he  has  acquired  in  harmony 
with  that  law;  just  in  that  proportion  will  its  stimulus 
to  labor  be  diminished,  and  the  increase  of  wealth  be  re- 
tarded. It  is  to  be  feared  that  governments  often  fail  to 
appreciate  the  delicacy  and  sacredness  of  this  function, 
and  by  inconsiderate  legislation  crush  out  that  prosper* 
ity  which  it  is  their  business  to  cherish  and  encourage. 


CAPITAL.  19 


CHAPTER   II. 


Capital, 

§  17.  Man  labors  that  he  may  satisfy  the  cravings 
of  desire.  But  he  has  certain  cravings  that  never  can 
be  satisfied.  The  reason  is,  that  the  aims  toward  which 
they  are  directed  can  never  be  fully  attained.  They  are 
needed  as  perpetual  stimuli  of  man's  effort  to  attain  that 
which  he  is  always  attaining  but  never  attains.  One  of 
these  is  the  love  of  gain.  It  is  easily  seen  why  this  is 
insatiable.  If  all  the  laws  of  man's  individual  and  social 
nature  are  obeyed,  the  progress  of  human  society  has  no 
assignable  limit.  It  is  capable  of  an  indefinite  growth  in 
numbers  and  in  all  the  elements  of  a  true  civilization. 
It  is  certain  indeed  that  there  is  somewhere  a  limit  to 
the  possible  increase  of  the  materials  of  human  suste- 
nance which  our  planet  can  produce.  But  that  limit  is 
so  far  removed  beyond  anything  which  man  has  yet 
achieved  or  conceived  of,  that  it  is  to  us  as  though  it  did 
not  exist. 

The  insatiable  character  of  the  love  of  gain  is  cor- 
relate to  this  capability  of  limitless  progress  in  society. 
It  is  a  provision  in  the  constitution  of  man  for  the  indefi- 
nite accumulation  of  the  products  of  human  labor,  to 
supply  the  wants  of  a  civilization  perpetually  advancing 
in  population  and  in  the  successful  efforts  of  inventive 
genius.  It  is  set  over  against  all  the  other  desires  of  the 
soul,  to  limit  their  gratification.  All  the  other  desires 
consume  the  results  of  labor  in  their  gratification.  This 
one  is  gratified  by  saving.  Hence  life  is  a  constant  com- 
promise between  the  desire  of  gain  on  the  one  hand,  and 
the  tendency  to  spend  in  the  gratification  of  other  de- 
sires on  the  other.     As  the  former  preponderates  theie 


^O  ECONOMICS. 

is  an  approach  to  one  extreme,  which  we  will  call  the 
extreme  of  frugality.  When  the  desire  of  gain  is  feeble, 
and  the  other  desires  preponderate,  there  is  an  approach 
to  the  other  extreme,  the  extreme  of  prodigality.  In  the 
former  case,  other  things  being  equal,  accumulation  will 
be  rapid,  in  the  latter  it  will  be  retarded,  or  in  peculiar 
circumstances  altogether  cease. 

§  18.  There  is  then  in  the  human  constitution,  a  pro- 
vision for  the  unlimited  accumulation  of  the  results  of 
labor  for  future  use.  Our  present  inquiry  is, — in  what 
relation  do  these  accumulations  stand  to  the  economic 
system  ?  To  what  uses  do  they  minister  }  Before  how- 
ever we  enter  on  these  inquiries,  it  is  necessary  to  define 
a  word  which  must  be  frequently  used  in  all  our  subse- 
quent discussions.  That  word  is  capital.  We  propose 
the  following 

Definition,  Capital  is  every  thing  produced  by  pre- 
vious human  labor  which  still  remains  unexpended. 

We  have  previously  included  all  that  can  be  owned 
and  exchanged  under  the  generic  concept  wealth.  By  a 
definition  also  previously  given  we  have  embraced  in  a 
species  under  that  genus  all  human  power  to  labor,  and 
called  the  species  labor.  By  the  definition  just  given 
we  have  appropriated  to  the  only  remaining  species  of 
the  genus  the  name  capital.  Wealth  therefore  expresses 
the  content  of  the  science,  and  the  two  words  labor  and 
capital  are  its  extent.  In  order  that  the  whole  subject 
may  be  presented  at  a  single  view  we  give  in  this  place 
two  or  three  other  definitions. 

All  capital  may  be  subdivided  into  two  classes,  viz., 
Fixed  Capital,  and  Circulating  Capital. 

Definition,  Fixed  Capital  is  that  which  is  employed  to 
aid  labor  and  render  it  efficient. 

Definition,  Circulating  Capital  is  that  which  is  pre- 
pared to  be  used  in  gratifying  human  desire. 


CAPITAL.  21 

Fixed  capital  is  capable  of  a  three-fold  subdivision, — ■ 
the  Real,  the  Mechanical  and  the  Mercantile. 

Definition,  Real  Fixed  Capital  consists  of  land  and 
all  its  improvements. 

Definition,  Mechanical  Fixed  Capital  is  that  which  is 
used  i?i  producing  and  7'egulating  momentum. 

Definition,  Mercantile  Fixed  Capital  is  that  which 
is  used  to  assist  exchanges. 

§  19.  We  are  not  sanguine  enough  to  expect  that  the 
definitions  given  in  the  previous  paragraphs  will  be  ac- 
cepted without  questioning  and  without  argument.  We 
prefer  however  to  leave  the  confirmation  of  our  positions 
to  the  subsequent  discussion  and  development  of  our 
system,  rather  than  enter  on  any  extended  argument  at 
this  point.  A  few  things  however  must  be  said  rather  in 
the  way  of  explanation  than  of  argument.  It  has  been 
usual  to  divide  all  accumulated  wealth  into  two  portions, 
one  portion  comprehending  all  that  which  is  devoted  to 
the  gratification  of  desire,  the  other  portion  compre- 
hending that  which  is  devoted  to  the  farther  production 
of  wealth.  To  the  latter  portion  only  the  word  capital 
has  been  applied.  Our  reflections  on  the  subject  have 
led  us  to  the  conclusion  that  it  is  not  possible  to  render 
this  distinction  clear  and  definite  for  scientific  purposes. 
Scarcely  any  thing  tends  so  much  to  confusion  ot 
thought,  as  attempts  at  distinction  when  the  things  to 
be  distinguished  from  each  other  are  not  separated  by 
any  boundaries  which  can  be  exactly  drawn  and  defined. 
It  seems  to  us  that  the  distinction  here  attempted  is  of 
this  character,  and  that  it  has  introduced  a  great  deal  of 
confusion  of  thought  into  the  whole  subject. 

We  have  chosen  therefore  to  neglect  this  distinction 
altogether,  and  to  regard  all  human  beings  as  laborers, 
and  the  support  of  all  who  are  supported,  in  such  de- 
grees of  expensiveness  as  they  actually  attain  to,  as  ue 


22  ECONOMICS. 

cessary  to  the  maintenance  of  the  labor  by  which  the 
economical  machinery  of  the  world  is  worked.  It  is  true 
that  nearly  half  the  human  race  are  in  infancy  and  child- 
hood, and  as  yet  not  only  unable  to  perform  any  labor, 
but  requiring  the  whole  labor-power  of  one  parent  to 
rear  and  care  for  them.  But  it  is  as  necessary  that  the 
wants  of  children  should  be  supplied  in  order  that  the 
ranks  of  efficient  laborers  should  be  kept  full,  as  it  is  that 
a  power-loom  should  be  built  before  one  can  weave  with 
it.  You  might  just  as  well  contend  that  a  power-loom  in 
process  of  construction  is  not  capital,  as  that  a  healthy 
new-born  infant  is  not  a  laborer,  or  that  the  man  who  is 
making  a  power-loom  is  not  a  laborer,  as  that  the 
mother  who  is  rearing  that  infant  is  not  a  laborer. 
Whatever  therefore  is  expended  in  rearing  children  is 
as  truly  capital  employed  in  supporting  labor,  as  the 
wages  given  to  the  laborer  of  to-day  for  the  work  of 
to-day. 

Many  are  incapacitated  for  labor  by  disease  or  the 
decrepitude  of  old  age.  These  must  be  supported  in 
consideration  of  the  work  they  have  done,  or  would  do 
if  they  were  able.  In  our  arrangements  for  the  support 
of  labor,  we  must  not  forget  our  social  nature.  Mutual 
support  is  as  necessary  to  the  working  of  the  economical 
machinery  of  the  world  as  individual  support.  It  is  as 
necessary  that  the  laborer  should  sustain  his  decrepid  or 
disabled  parent,  child,  brother,  sister,  as  that  he  should 
eat  or  wear  clothes. 

§  20.  It  is  true  that  many  live  more  expensively  than 
is  absolutely  necessary  to  the  performance  of  labor.  But 
we  have  already  seen  that  in  the  view  of  the  economist 
it  is  very  desirable  that  all  should  do  so.  The  princi- 
pies  of  a  true  economy  abundantly  recognize  it  as  fit  and 
wise  that  the  support  of  the  laborer  should  imply  not 
only  such  a  supply  of  the  bare  necessaries  of  life  as  will 


CAPITAL.  23 

keep  the  machinery  of  bones,  sinews,  muscles  and  nerves 
in  working  order,  but  all  the  conditions  of  a  proper  hu- 
man life. 

If  it  is  still  asserted  that,  beyond  all  that  these  con- 
siderations embrace,  there  is  a  vast  waste  of  the  wealth 
of  every  community ;  our  reply  is,  that  the  true  economist 
will  acknowledge  this,  and  unite  with  all  good  men  in 
deploring  it.  But  all  he  can  do  about  it  is  to  wish  that 
men  may  become  wiser  and  therefore  happier.  Their 
lack  of  wisdom  however  cannot  modify  his  science.  '  If 
all  which  is  expended  in  the  gratification  of  human  de- 
sire, is  not  the  fit  and  proper  reward  of  labor,  the  reason 
is  to  be  sought,  not  in  the  structure  of  the  economic  ma- 
chine, but  in  the  follies  of  men. 

We  are  justified  therefore  in  the  position,  that  for  all 
the  purposes  of  our  science,  the  sole  function  of  all  accu- 
mulated results  of  human  labor  is  to  support  and  assist 
labor  and  render  it  efficient.  It  is  therefore  properly  all  to 
be  regarded  as  capital. 

§  21.  Let  us  next  inquire  how  this  is  accomplished. 

First,  Every  laborer  has  immediate  wafits  which  must 
be  satisfied  while  he  is  performing  his  labor,  and  waiting 
far  the  mature  results  of  it.  The  supply  of  these  must 
come  from  the  results  of  pre-exerted  labor.  Man  is  not 
like  the  bird  of  the  air  that  makes  a  breakfast  of  the 
insect,  the  worm  or  the  seed  it  has  even  now  picked  up. 
He  must  for  the  most  part  live  to-day  on  the  results  of 
the  labor  of  previous  days,  and  the  labor  of  to-day  must 
supply  the  subsistence  of  coming  days.  This  is  one  of 
the  reasons  why  he  is  made  capable  of  foresight  and 
accumulation.  The  first  function  of  capital  is  to  sustain 
the  laborer  while  he  is  doing  his  work. 

Second,  Man  can  do  nothing  without  a  tool.  The 
savage  must  have  his  bow  and  arrows.  Every  tool  is  a 
product  of  a  rational  soul.     Human  life  is  impossible 


24  ECONOMICS. 

except  as  man  employs  his  rational  powers  in  devising 
and  executing  contrivances  by  which  he  engages  the 
forces  of  the  material  world  to  aid  him  in  accomplishing 
his  ends.  Every  tool,  from  the  bow  and  arrows  of  the 
savage  upward,  is  such  a  contrivance.  No  man  can  have 
a  tool  to  aid  the  work  of  the  moment,  except  as  the  pro- 
duct of  some  previous  labor.  Of  all  the  millions  who 
are  to-day  performing  the  labor  of  the  world,  very  few 
could  be  found  who  had  not  tools  in  their  hands,  without 
which  the  results  they  are  aiming  at,  either  could  not  be 
accomplished  at  all,  or  if  at  all  not  without  greatly  in- 
creased difficulty.  The  amount  of  wealth  invested  in 
such  tools  at  any  one  time  is  enormous. 

The  second  function  of  capital  is  to  supply  each  indi' 
vidual  laborer  with  necessary  tools. 

Third,  The  time  is  past  in  which  the  needs  of  society 
can  be  supplied  by  those  simple  tools  which  have  for  the 
most  part  sufficed  for  past  generations.  The  demand 
has  now  become  imperative  for  those  complicated  ma- 
chines for  increasing  the  efficiency  of  labor,  the  use  of 
which  is  one  of  the  grandest  characteristics  of  this 
modern  age.  In  principle  a  machine  does  not  differ  at 
all  from  the  simplest  tool,  as  a  knife,  spade,  or  hammer. 
Both  are  alike  arrangements  for  rendering  the  natural 
forces  around  us  the  helpers  of  our  toil.  The  difference 
is  only  in  the  scale  on  which  this  is  accomplished.  The 
machine  is  often  as  complicated  and  costly  as  the  tool 
is  simple  and  inexpensive.  It  is  only  when  we  contem- 
plate the  vast  outlays  of  wealth  demanded  by  modern 
manufactures  and  locomotion,  that  we  begin  to  form  a 
just  conception  of  the  importance  of  capital  to  human 
well-being.  It  is  doubtful  whether  the  wealth  of  the 
Roman  Empire  in  its  palmiest  days  would  have  sufficed 
to  construct  the  railways  of  the  United  States. 

The  third  function  of  capital  is  to  entourage  theinven* 


CAPITAL.  25 

tton  and  provide  for  the  construction  of  the  complicated  ma- 
chines which  have  become  a  necessity  of  civilization. 

§  22.  We  have  no  difficulty  then  in  discerning  the 
purposes  which  capital  is  intended  to  accomplish  in  the 
economic  system.  Every  human  being  is  inte?ided  to  be  a 
laborer,  to  affect  more  or  less  of  changes  which  should  be  con- 
ducive to  human  well-being.  Every  laborer  is  intended  in 
nature's  plan  to  receive  such  a  support  from  the  results 
of  his  labor  as  will  enable  him  to  lead  a  true  and  proper 
human  life.  All  labor  is  to  be  assisted  by  such  tools  as 
human  genius  can  invent,  for  rendering  natural  forces  to 
the  utmost  possible  extent  helpful  of  human  effort. 

It  must  also  be  kept  in  mind  that  man's  power  to 
labor  is  applicable,  and  is  designed  to  be  applied  to  the 
entire  development  of  a  perfected  humanity.  He  who 
exerts  his  God-given  powers  in  aid  of  the  true  culture  of 
the  intellectual,  social,  esthetic  or  moral  nature  of  man 
is  no  less  a  laborer  in  the  view  of  a  true  economy,  than 
he  who  makes  corn  to  grow,  where  without  his  labor 
none  would  have  grown.  To  aid,  encourage  and  reward 
such  labor  is  no  less  included  in  the  true  function  of 
capital  than  to  aid  in  tilling  the  soil.  A  true  system  of 
economics  has  no  more  difficulty  in  finding  a  place  for 
the  labors  of  a  Raphael,  or  a  Michael  Angelo  than  for 
the  building  of  a  railway  or  a  steam  engine. 

§  23.  Nor  will  our  view  of  the  subject  be  adequate 
w^ithout  a  full  recognition  of  the  principle,  that  both  labor 
and  capital  are  quite  independent  of  the  nationalities, 
the  political  divisions  of  the  earth.  In  the  grand  aggre- 
gate, wealth  in  all  its  forms  is  a  God-given  patrimony 
of  the  human  family.  In  the  present  condition  of  econom- 
ic science,  it  is  not  to  be  expected  that  this  proposition 
will  be  believed,  unless  it  can  be  proved,  but  we  think 
the  proof  is  easy.  This  is  certainly  not  the  stand-point 
from  which  economists  are  accustomed  to  view  the  sub- 


26  ECONOMICS. 

ject ;  but  is  it  not  the  stand-point  from  which  it  must  be 
viewed,  to  be  seen  truly?  The  question  which  to  a 
great  extent  writers  have  had  in  mind  is, — how  may  a 
nation  grow  rich  ?  We  claim  that  the  true  question  is, — 
how  may  men  grow  rich?  How  may  any  man  of  any 
nation  increase  in  wealth  most  rapidly  ?  If  we  have  a 
science  of  economics  it  must  be  universal.  If  it  is  a 
science  it  will  develop  an  economic  system,  in  accord- 
ance with  which  all  men  of  all  nationalities  will  most 
successfully  supply  their  wants  and  increase  their 
wealth. 

That  this  is  the  true  stand-point  from  which  to  view 
the  subject,  is  demonstrated  by  many  facts  that  admit  of 
no  denial.  There  is  no  privilege  which  the  world  re- 
gards as  more  sacred  than  the  right  of  every  man  who 
possesses  power  to  labor  to  exert  that  power  wherever 
he  can  receive  for  it  the  highest  compensation.  For  ex- 
ample, the  world  is  before  an  American  laborer.  He 
may  go  and  exert  his  powers  in  any  spot  on  the  face  of 
the  earth.  National  lines  have  no  necessary  relation  to 
the  matter.  The  only  question  he  is  concerned  with,  is, 
not  how  his  labor  can  do  most  to  enrich  the  United 
States,  but  where  on  earth  it  is  most  wanted,  as  indi- 
cated by  the  fact,  that  in  that  spot  it  will  command  a 
higher  compensation  than  in  any  other.  His  labor  is  a 
part  of  the  world's  wealth,  and  not  of  American  wealth  ; 
and  where  he  finds  the  world  most  wants  it,  he  will 
spend  it.  Labor  is  then  a  human  and  not  a  national 
patrimony.  No  American  thinks  of  complaining  because 
labor  of  American  birth  and  training  is  found  in  almost 
every  nation  under  heaven.     This  is  just  as  it  should  be. 

The  same  is  true  of  capital.  No  man  in  his  senses 
would  think  of  confining  the  capital  of  England  to  her 
own  island.  It  is  a  part  of  the  universal  patrimony.  It 
is   only   necessary   to   convince   an   English    property- 


CAPITAL.  27 

holder,  that  an  investment  in  a  canal  across  the  Isthmus 
of  Suez,  or  in  a  railway  in  India,  or  across  the  Rocky 
Mountains,  will  pay  better  than  any  he  can  make  in  Eng- 
land, to  secure  such  an  investment  without  delay.  Capi- 
tal has  in  itself  a  sort  of  consciousness  that  it  is  cosmo- 
politan, that  it  has  and  can  have  no  nationality.  Eng- 
lish capital  and  Irish  and  German  labor  build  American 
railways  and  American  cities,  and  American  capital 
runs  a  line  of  steamers  far  up  into  the  heart  of  China. 
The  fact  that  both  capital  and  labor  have  in  themselves 
such  a  consciousness  of  their  human  and  universal  rela- 
tions and  destiny  is  surely  a  sufficient  reason  why  the 
science  that  treats  of  them  should  be  universal  also. 

§  24.  There  is  fio  assignable  limit  to  the  possible  increase 
of  the  efficiency  of  labor  by  the  aid  of  capital.  As  long  as 
there  is  any  surplus  above  bare  necessaries,  there  will 
always  be  some  tendency  to  convert  circulating  capital 
into  fixed  capital.  Men  will  always  seek  to  accomplish 
their  ends  with  the  least  possible  exertion  of  their  own 
powers.  If  one  performs  with  his  own  hand  the  labor  he 
needs,  he  will  find  it  irksome,  and  be  always  looking 
around  him  for  the  means  of  making  it  easier.  If  he 
employ  the  labor  of  others,  he  will  wish  to  use  as  little 
as  possible,  in  order  that  his  own  gain  may  be  greater. 
Any  means  therefore  will  always  be  in  demand,  by  which 
a  given  desired  result  can  be  attained  by  less  labor. 
Some  men  will  therefore  find  inducement  to  devote 
themselves  to  inventing  and  constructing  fixed  capital. 
As  these  men  must,  like  every  other  human  being,  live 
on  circulating  capital,  they  are  engaged  in  changing  cir- 
culating capital  into  fixed  capital. 

In  a  general  view  of  the  case,  it  would  appear  that 
the  result  of  this  must  be  two-fold,  and  it  will  appear 
from  a  thorough  examination  of  the  whole  subject  that 
this  view  is  correct. 


28  ECONOMICS. 

First,  It  will  mcrease  the  efficiency  of  existing  labor ^  and 
render  the  surplus  of  circulating  capital  above  bare  necessa- 
ries greater  than  before.  This  will  increase  the  motive  to 
convert  circulating  into  fixed  capital ;  for  there  will  be 
more  circulating  capital  than  is  needed,  and  some  of  it 
must  be  converted  into  fixed  capital,  or  be  useless.  No 
one  can  assign  any  limit  to  this  process. 

Second,  Such  a  continually  increasing  supply  of  circu- 
lating capital  as  must  result  from  this^  must  render  the 
satisfaction  of  all  human  want  easier^  and  mankind  richer^ 
and,  if  they  are  wise,  happier.  Other  questions  however 
here  arise.  Will  not  this  render  the  capitalist  in  a  great 
measure  independent  of  the  laborer,  diminish  the  de- 
mand for  labor,  and  thus  reduce  its  wages  ?  Will  not 
this  progressive  increase  of  fixed  capital  set  the  extremes 
of  society  more  remote  from  each  other  than  ever? 
Will  it  not  make  the  rich  man  richer,  and  the  poor  man 
poorer  ?  Will  not  the  owner  of  a  powerful  labor-saving 
machine  be  able  to  dictate  wages  to  his  laborers,  and 
prices  to  his  customers  ?  Will  not  society  be  divided  be- 
tween boundless  wealth  and  abject  poverty  t 

To  answer  these  questions  belongs  to  Distribution, 
and  the  consideration  of  them  must  therefore  be  deferred 
for  the  present.  If  our  science  cannot  at  the  proper 
time  return  a  satisfactory  answer  to  them,  it  is  surely  a 
prophet  of  evil  and  can  afford  us  very  little  comfort. 

§  25.  To  this  indefinite  increase  of  fixed  capital,  there 
seems  however  to  be  one  very  important  exception,  at 
least  in  respect  to  labor-saving  machinery.  It  can  have 
no  such  indefinite  multiplication  in  the  department  of 
agriculture  as  in  many  other  branches  of  industry.  The 
reason  is  found  in  the  nature  of  the  case.  In  manufac- 
turing industry,  or  in  locomotion,  a  machine  may  be 
kept  in  constant  use,  and  thus  yield  a  constant  income. 
In  agriculture  no  machine  can  be  used  for  more  than  a 


CAPITAL.  29 

portion  of  the  year,  most  machines  only  for  a  few  days 
of  the  year,  and  must  not  only  be  quite  useless  for  the 
remainder  of  it,  but  involve  expense  to  protect  them  from 
injury.  If  the  machines  used  in  manufacturing  could  be 
employed  but  three  weeks  in  the  year,  and  must  be  fur- 
nished with  house  room  for  the  rest  of  it,  most  of  them 
would  be  quite  worthless.  This  is  an  inevitable  and  a 
nearly  fatal  drawback  to  the  profit  to  be  derived  from 
agricultural  machinery.  It  is  admitted  by  those  practi- 
cally acquainted  with  the  subject,  that  most  of  the  agri- 
cultural machines  now  in  use  do  not  much  diminish  the 
expense  of  the  processes  to  which  they  are  applied. 
They  are  chiefly  important,  because  it  is  impossible  to 
command  a  sufficient  number  of  laborers  to  accomplish 
certain  processes  in  the  season  of  them.  There  doubt- 
less are  some  machines  of  which  this  is  not  true.  But 
even  in  respect  to  them,  the  fact  that  they  must  be  use- 
less for  ten  or  eleven  months  in  the  year  detracts  so 
much  from  the  profit  of  using  them,  that  they  become, 
as  compared  with  manufacturing  machinery,  of  small 
importance,  and  can  never  very  greatly  affect  the  cost 
of  tillage. 

The  fixed  capital  of  agriculture  is  land  itself,  sub- 
dued and  fitted  for  cultivation,  and  its  improvement 
must  consist  chiefly  in  the  discovery  and  application  of 
better  methods  of  increasing  its  fertility.  But  as  wealth 
and  population  advance,  a  vast  outlay  of  capital  will  be 
justified  and  required  for  subduing  new  lands,  and  sub- 
jecting them  to  cultivation.  The  subject  of  rent  is  to  be 
examined  hereafter.  It  is  necessary  to  say  at  this  point, 
that  the  cause  which  extends  the  area  of  cultivation  with 
the  progress  of  capital  and  population,  is  the  fact  that 
an  increased  demand  for  food  and  a  lower  rate  of  inter- 
est will  render  increasing  outlays  of  capital  in  subduing 
land  not  hitherto   brought  under  cultivation  profitable 


30  ECONOMICS. 

modes  of  investment.  It  is  always  costly  to  remove  the 
obstructions  which  naturally  stand  in  the  way  of  culti- 
vation. The  greater  the  demand  for  food,  and  the  lower 
the  rate  of  interest,  the  greater  will  be  the  expenditure 
of  capital  for  this  purpose.  On  the  Atlantic  slope  of 
this  continent  are  many  millions  of  acres  of  land,  which 
in  their  present  condition  will  never  yield  anything.  But 
should  our  population  be  very  greatly  increased,  and  our 
rates  of  interest  decline  to  such  rates  as  are  now  paid 
in  England,  these  lands  would  justify  and  reward  a  suf- 
ficient outlay  of  capital  to  render  them  highly  productive. 


CHAPTER  III. 

Capital  a   Universal  Patrimony. 

§  26.  TuE  principle  implied  in  the  heading  of  this 
chapter  has  been  already  asserted,  though  without  any 
argument  in  confirmation  of  it.  On  the  other  hand  the 
fundamental  law  of  the  science  already  enunciated  sub- 
jects all  possible  wealth  to  an  exclusive  individual  own- 
ership. How  can  it  be  made  to  appear  that  these  two 
principles  are  possibly  consistent  with  each  other?  It 
is  quite  necessary  that  we  answer  this  inquiry,  or  retract 
one  or  both  of  our  previous  assertions.  Our  answer  is 
contained  in  the  following  proposition,  viz  : 

By  the  law  of  individual  07vnership,  the  use  and  benefit 
of  all  existing  capital  is  more  perfeetly  secured  to^  the  ivhole 
human  family  than  it  could  be  under  ajty  other  conceivable 
arrangement.  The  very  nature  of  ownership  insures  this 
result,  not  only  in  respect  to  capital,  but  in  respect  to 
both  forms  of  wealth.     This  proposition  occupies  a  very 


CAPITAL    A    UNIVERSAL    PATRIMONY.  3 1 

central  position  in  the  science  of  economics,  and  must 
be  clearly  established. 

Regarding  every  man's  power  to  labor  as  an  element 
in  the  world's  wealth, — or  if  we  for  a  moment  assume 
that  it  may  be  so — we  should  readily  admit,  that  the 
fiist  use  to  which  the  results  of  his  labor  should  be 
applied  would  be  self-support,  to  preserve  himself  in 
working  order,  to  save  his  power  to  labor  from  being  im- 
paired or  extinguished.  We  should  admit  this  if  we  had 
reference  to  the  general  good  only,  just  as  we  should 
admit  that  the  first  use  to  be  made  of  the  profits  of  a 
steam  flouring  mill  should  be  to  keep  the  mill  in  perfect 
repair,  in  order  to  render  it  as  useful  as  possible  to  the 
public.  Such  a  use  of  the  first  products  of  labor  would, 
on  the  supposition  we  have  made,  be  in  perfect  accord- 
ance with  the  law  we  are  proposing  to  substantiate.  Let 
us  now  make  the  additional  supposition,  that  the  laborer 
in  question  produces  a  surplus  above  self-support;  he 
owns  that  surplus  and  will  of  course  employ  it  according 
to  his  own  judgment,  for  his  own  advantage.  There  is 
but  one  way  in  which  he  can  use  it  for  his  own  advan- 
tage. He  must  use  it  to  assist  labor.  The  product  of 
his  labor  will  thereby  be  increased,  and  as  he  does  not 
himself  need  that  which  will  be  produced  by  the  addi- 
tional labor  which  he  will  thus  be  able  to  perform,  he 
must  and  will  employ  it  in  producing  that  which  some- 
body else  wants.  His  own  highest  advantage  will  be 
secured  by  producing  that  which  is  more  wanted  than 
anything  else  within  his  power.  He  is  compelled  by  the 
very  nature  of  ownership,  as  the  only  possible  means  of 
securing  the  gratification  of  his  own  desires,  to  produce 
precisely  that  which  the  world  most  needs,  or  at  least 
believes  that  it  most  needs.  By  the  very  law  of  owner- 
ship, the  addition  which  he  has  made  to  his  own  wealth 
must  also  be  an  addition  to  the  common  patrimony  of 


32  ECONOMICS. 

the  human  race.  He  can  only  use  it  as  his  own,  by 
using  it  in  producing  that  which  will  supply  the  want  of 
which  the  world  is  most  conscious.  It  may  be  that  that 
want  exists  on  the  opposite  side  of  the  globe,  and  that 
to  get  the  advantages  which  he  is  to  derive  from  his 
newly  acquired  wealth,  he  must  send  the  products  of  his 
labor  to  China  or  Japan.  He  will  dispose  of  them  in 
the  spot  where  he  finds  the  greatest  conscious  need  of 
them  to  exist.  To  make  his  capital  most  his  own,  min- 
ister most  to  his  own  advantage,  he  must  be  the  servant 
of  mankind. 

§  27.  Let  us  now  apply  this  principle  to  such  a  vast 
estate  as  that  of  the  late  A.  T.  Stewart.  There  are 
questions  with  respect  to  the  relations  of  such  an  estate 
to  general  economic  interests,  which  we  are  not  prepared 
to  meet  at  this  stage  in  the  development  of  our  subject. 
It  is  asserted,  not  perhaps  without  reason,  that  such 
great  accumulations  of  capital  under  the  control  of  a 
single  mind  are  capable  of  being  so  used  as  to  suspend, 
at  least  temporarily,  the  natural  law  of  competition.  We 
must  defer  any  inquiry  into  such  a  liability,  till  the  law 
of  competition  shall  have  been  unfolded,  as  it  will  be  in 
a  subsequent  part  of  this  treatise.  Waiving  that  ques- 
tion for  the  present,  it  is  plain  that  such  an  estate  may 
be  conceived  of  as  divided  into  two  parts,  one  of  which 
shall  consist  of  all  that  portion  of  the  estate  which  the 
proprietor  used  for  the  gratification  of  other  desires  than 
that  of  gain,  the  other  and  very  much  larger  portion  of  it 
which  he  employed  as  an  investment,  for  the  increase  of 
his  wealth.  It  is  obvious  in  respect  to  the  part  last 
mentioned,  that  it  was  made,  through  his  ownership, 
strictly  a  portion  of  the  world's  common  patrimony. 
Mr.  Stewart  was  the  treasurer  of  it,  to  manage  it  for  the 
benefit  of  mankind.  There  may  have  been  no  philan- 
thropy  at   all   in   his  intentions.     He   may  have  been 


CAPITAL   A   UNIVERSAL   PATRIMONY.  33 

wholly  governed  by  the  hard,  cold  greed  of  gain.  But 
he  could  gain  nothing  from  it  except  by  employing  it  in 
supplying  the  wants  of  mankind  ;  and  he  could  make 
the  greatest  possible  gain  from  it,  only  by  using  it  in 
providing  a  supply  of  those  wants  of  which  the  great  hu- 
man family  was  most  intensely  conscious.  The  success 
of  his  vast  enterprises  would  of  necessity  have  been 
directly  and  exactly  proportioned  to  his  sagacity  in  dis 
cerning  what  and  where  that  greatest  conscious  want 
was.  He  meant  not  so  perhaps,  neither  did  his  heart 
think  so,  but  the  very  law  of  ownership  compelled  him  to 
be,  to  the  full  extent  of  all  which  he  employed  for  the 
purposes  of  gain,  simply  and  only  a  treasurer,  and  as 
skillful  a  treasurer  as  possible  for  the  general  good  of 
the  race.  The  law  of  ownership  and  the  love  of  gain 
wath  which  he  was  endowed  combined  to  compel  him  to 
manage  that  great  estate  for  the  benefit  of  his  fellow- 
men.  So  far  therefore  as  the  capital  of  the  world  is  em- 
ployed by  its  owners  for  the  gratification  of  their  love  of 
gain,  it  must  be  used  both  to  aid  and  reward  labor,  and 
to  employ  that  labor  as  efficiently  as  possible  in  produc- 
ing that  which  mankind  are  most  consciously  in  need  of. 
§  28.  Let  us  now  see  how  the  case  stands  in  respect 
to  that  part  of  his  property  which  he  used  for  the  gratifi- 
cation of  his  own  taste  and  desires  other  than  that  of 
gain.  We  must  in  the  first  place  bear  in  mind  that  Mr. 
Stewart  was  no  less  a  laborer  than  the  clerks  that  stood 
behind  his  counters.  It  was  no  contemptible  service 
which  he  performed  for  mankind,  in  managing  for  their 
benefit  a  property  of  many  millions  of  dollars.  If  his 
vast  property  had  been  owned  by  a  joint-stock  company, 
the  stockholders  would  have  been  only  too  glad  to  pay 
a  very  large  remuneration  to  a  man  of  such  financial 
talent  as  Mr.  Stewart  possessed,  to  act  as  their  manager. 
The  labor  which  he  performed  was  of  a  kind  which  al~ 
2* 


34  ECONOMICS. 

ways  commands  the  highest  compensation,  according  to 
a  natural  law  of  wages  to  be  hereafter  explained.  In 
that  view  alone  it  would  be  difficult  to  prove,  that  the 
compensation  which  he  received  for  his  labor  was  at  all 
extravagant.  The  most  careful  examination  might 
show,  we  think  it  would  show,  that  he  managed  that 
whole  vast  property  for  the  supply  of  human  want  for  a 
very  small  remuneration. 

Again  it  must  be  borne  in  mind,  that  those  persons 
who  use  large  means  for  the  satisfaction  of  their  own 
desires,  are,  like  the  rest  of  mankind,  esthetic  beings, 
and  will  therefore  expend  much  upon  objects  of  beauty. 
Many  of  those  objects  will  be  open  to  the  view  of  all  the 
world,  and  can  be  enjoyed  by  millions  as  well  as  by  the 
owner.  Mr.  Stev/art's  late  residence,  for  exam.ple,  on  the 
corner  of  Fifth  Avenue  and  Thirty-fourth  Street,  is  an 
object  of  interest  to  every  visitor  of  New  York  from 
whatever  land  he  comes.  But  for  the  large  income  of 
men  of  wealth,  the  beautiful  domestic  architecture  which 
is  more  and  more  adorning,  not  only  our  cities  and  large 
towns,  but  even  our  villages  and  farms,  would  never  have 
any  existence.  What  intelligent  man  does  not  rejoice 
that  there  is  a  provision  in  nature's  economic  system  for 
thus  thickly  strewing  over  the  face  of  the  earth  the  glo- 
rious charm  of  beauty  ?  What  man  whose  memory  runs 
back  to  fifty  years  ago  would  willingly  consent  that  our 
domestic  architecture  and  landscape  gardening  should  be 
put  back  again  to  the  condition  in  which  they  were  at 
the  beginning  of  that  period  ?  Does  not  every  one  feel 
that  it  would  be  a  sad  loss  to  the  whole  community? 
Such  would  be  the  fact,  if  men  of  wealth  had  not  the 
means  of  gratifying  their  love  of  the  beautiful.  All 
things  considered,  it  would  be  difficult  to  show  that  the 
outlay  for  such  purposes  is  at  all  in  excess  of  what  a  re- 
gard for  the  general  welfare  would  require. 


CAPITAL    A   UNIVERSAL    PATRIMONY.  35 

Even  in  respect  to  those  objects  of  beauty  which 
adorn  the  interior  of  a  rich  man's  dwelling,  though  they 
are  covered  from  the  view  of  the  million,  they  are  yet 
seen  and  enjoyed  by  multitudes,  and  through  their  influ- 
ence become  instruments  of  general  culture  and  happi- 
ness. The  existence  of  such  objects  of  beauty  is  there- 
fore by  no  means  valueless  to  the  whole  human  family. 
We  cannot  however  forbear  expressing  in  this  place  our 
disapprobation  of  all  those  usages  in  society  which  tend 
to  exclude  the  multitude  from  the  enjoyment  of  whatever 
is  beautiful  in  natural  scenery,  landscape  gardening  and 
architecture.  It  is  to  be  hoped  that  in  our  country  high 
stone  walls  will  never  shut  out  not  only  the  feet  but  the 
eyes  of  the  multitude  from  those  combinations  of  natural 
scenery,  artistic  ornamentation,  and  elegant  architecture 
by  which  men  of  wealth  seek  to  gratify  their  love  of  the 
beautiful. 

We  have  therefore  sustained  our  proposition,  that  by 
the  very  nature  of  ownership  the  possessors  of  this 
world's  wealth  are  made  to  hold  their  property  as  the 
treasurers  of  the  human  race.  Some  of  them  may  have 
become  treasurers  by  fraud  and  robbery.  Our  science 
has  no  smile  of  approval  for  them,  any  more  than  for 
other  usurpers  of  positions  of  place  and  power.  But  all 
those  who  have  acquired  their  possessions  by  fair  and 
legitimate  means  have  been  made  treasurers,  not  by  pop- 
ular election  or  by  appointment  from  any  of  the  higher 
powers  of  the  earth,  but  by  their  wisdom,  industry,  and 
skill  in  affairs,  or  in  other  words  by  proving  their  fitness 
for  the  high  trust.  If  at  any  future  time  they  become 
reckless  and  improvident,  or  transmit  their  estates  to 
children  who  are  so,  their  wealth  will  slip  from  their 
hands ;  they  will  be  forced  to  abdicate  their  treasurer- 
ship  by  showing  their  unfitness  to  discharge  the  trust 
reposed  in  them. 


S.6  ECONOMICS. 

§  29.  It  may  be  said  these  treasurers  are  often  un- 
faithful and  abuse  the  trust  committed  to  them.  This 
cannot  be  denied.  But  human  imperfection  mars  all  the 
works  of  man.  If  any  one  thinks  he  has  a  valid  objec- 
tion to  this  order  of  things,  it  were  well  for  him  very 
seriously  to  consider,  whether  he  can  suggest  any  other 
arrangement,  which  would  afford  as  good  security  as  we 
have  under  the  present  system  of  individual  ownership, 
that  the  wealth  of  the  world  would  be  faithfully  applied 
to  the  supply  of  human  want.  Doubtless  rich  men  might 
often  manage  their  affairs  much  better  for  their  own 
good,  and  much  better  for  the  general  good  than  they 
do.  But  for  the  mismanagement  of  the  great  common 
patrimony  which  really  occurs,  the  masses  are  far  more 
responsible  than  the  few  rich  men  that  own  most  of  the 
property.  The  masses  often  fatally  misjudge  of  their 
own  real  wants,  and  demand  that  the  capital  of  the  world 
shall  be  employed  in  supplying  wants  which  are  imag- 
inary and  false,  and  the  supply  of  which  is  not  beneficial 
but  hurtful ;  instead  of  furnishing  those  things  which 
tend  to  the  promotion  of  real  well-being.  Of  this  the 
enormous  trade  in  alcoholic  stimulants  furnishes  a  very 
sad  example.  When  the  people  learn  rightly  to  estimate 
their  own  wants,  this  trade  will  decline  from  its  present 
enormous  magnitude  to  very  small  dimensions. 

§  30.  This  view  of  the  functions  of  capital  would  be 
quite  defective  if  it  did  not  embrace  one  further  con- 
sideration. A  treatise  on  the  science  of  Economics  has 
nothing  to  do  with  questions  of  duty.  But  it  is  not  in- 
appropriate here  to  remark,  that  there  are  great  public 
interests  which  can  be  provided  for  only  by  the  m.unifi- 
cence  of  the  wealthy ;  and  that  in  all  the  countries  of 
modern  Christendom,  such  interests  have  been  largely 
so  cared  for.  Every  wise  man,  if  by  the  possession  of 
capital  he  is  made  one  of  the   world's  treasurers,  will 


DIVISION    OF    LABOR.  37 

recognize  it  as  one  of  the  privileges  of  his  high  position, 
that  he  may  enjoy  the  luxury  of  practicing  an  enlarged 
and  generous  philanthropy.  The  more  society  is  cul- 
tivated and  morally  improved,  the  more  will  men  of 
wealth  become  the  benefactors  of  the  human  family,  not 
only  from  necessity  under  the  impulse  of  the  love  of  gain, 
but  also  from  the  promptings  of  a  philanthropic  spirit. 

§  31.  In  our  examination  of  the  functions  and  uses 
of  capital,  we  have  therefore  found  good  solid  founda- 
tions for  the  following  positions  ;  that  the  one  object  of 
all  capital  is  to  reward  and  assist  labor ;  that  it  is  not 
national  or  political,  but  universal  and  human  in  its  func- 
tion and  destiny ;  that  it  is  a  common  patrimony  given 
to  the  human  race  by  the  Creator,  compelled  to  be  so 
used  by  the  law  of  ownership  and  the  nature  of  man  j 
that  its  owners  are  the  world's  treasurers,  designated  to 
their  high  trust  by  having  given  evidence  of  possessing 
such  skill  and  wisdom  as  fit  them  to  discharge  it ;  and 
that  there  is  in  the  nature  of  man  and  his  relation  to 
things  around  him,  provision  for  its  indefinite  increase 
to  supply  the  growing  wants  of  a  progressive  civilization. 


CHAPTER  IV. 

Division  of  Labor, 

§  32.  Man  was  made  for  society,  and  society  is  ren- 
dered  possible  only  by  the  mutual  dependence  of  those 
who  compose  it.  Division  of  labor  is  the  necessary 
result  of  this  great  social  law  of  our  constitution.  The 
most  primitive  and  fundamental  manifestation  of  it  is 
found  in  sex,  creating  the  necessity  of  marriage  and  the 
mutual  relations  of  husbands  and  wives,  parents   and 


38  ECONOMICS. 

children.  In  this  most  natural  of  all  societies,  each 
member  has  his  function,  and  each  is  happy  not  by  his 
own  independent  efforts,  but  by  the  mutual  helps  and 
services  of  all.  Such  in  principle  is  all  human  life. 
The  man  who  should  emancipate  himself  from  this  de- 
pendence, do  all  for  himself  and  nothing  for  others,  would 
sink  lower  than  savage  life  ;  he  would  become  a  solitary 
wild  beast.  A  flock  of  sheep  or  a  herd  of  buffalo  could 
teach  him  lessons  of  civilization. 

Two  well  established  principles  of  human  nature 
combine  to  the  same  result.  First,  Individuals  are  very 
differently  constituted  as  to  their  powers  and  capacities. 
One  man  has  strength  of  muscle,  and  power  of  endu- 
rance. Another  has  tact,  pliancy  of  muscle,  delicacy  of 
touch,  and  exactness  of  adaptation.  Another  still  has 
peculiar  mental  endowments,  such  as  insight,  the  power 
to  analyze  the  most  complicated  wholes  into  their  sim- 
plest parts,  and  to  combine  many  parts  into  new  and 
beautiful  or  eminently  useful  wholes.  The  more  men 
are  civiHzed,  developed,  cultivated,  the  more  these  differ- 
ences become  apparent  and  the  more  they  are  multi- 
plied. Each  of  these  natural  endowments  constitutes  a 
fitness  for  doing  some  things,  and  often  a  corresponding 
disqualification  for  doing  other  things.  Those  natural 
endowments  which  perfectly  qualify  woman  to  perform 
her  function  in  the  domestic  society,  disqualify  her  to 
sustain  those  severe  labors  by  which  a  family  is  fed  and 
clothed  and  housed  in  circumstances  of  comfort  and 
abundance.  Every  human  society  is  in  like  manner  a 
whole  made  up  of  very  dissimilar  parts  all  conspiring  to 
a  common  end.  Every  man  and  every  woman  is  to  be 
made  happy,  not  by  doing  every  thing  for  self,  but  by 
performing  well  some  very  limited  function,  and  depend- 
ing for  all  the  rest  on  many  other  persons  performing 
their  limited  functions  also. 


DIVISION    OF    LABOR.  39 

§  33.  Second,  The  other  law  of  human  nature  referred 
to  above  is  the  law  of  habit.  What  one  does  frequently, 
he  acquires  the  power  of  doing  easily  and  skillfully. 
When  therefore  one  devotes  himself  exclusively  to  the 
doing  of  that  for  which  he  has  some  natural  fitness,  he 
acquires  such  dexterity  in  doing  it,  that  any  one  who 
wants  that  thing  done  can  far  better  afford  to  pay  him  for 
doing  it  than  to  do  it  for  himself;  and  the  skilled  man 
can  accomplish  so  much  more  in  doing  that  one  thing 
where  his  skill  lies,  that  he  cannot  afford  to  do  anything 
else.  In  order  therefore  that  labor  may  be  in  the  highest 
degree  efficient,  it  is  necessary  that  every  one  should  so 
devote  himself  to  some  one  line  of  employment,  as  to  ac- 
quire the  skill  which  habit  confers,  and  that  each  should 
as  far  as  possible  employ  his  labor  in  doing  that  in 
which  he  has  greatest  skill. 

Arrangements  suggested  by  these  two  laws  of  human 
nature  have  perhaps  accomplished  more  to  render  hu- 
man labor  efficient  than  labor-saving  machinery  itself. 
These  arrangements  are  described  by  the  phrase  Divis- 
ion of  Labor.     Of  this  term  we  propose  the  following 

Definition,  Division  of  labor  is  such  a  distribution 
of  the  labor  by  which  the  wants  of  men  are  supplied^  that 
each  individual  may  devote  himself  exclusively  to  some  one 
or  to  a  very  few  processes. 

Let  us  now  suppose  that  in  a  community  devoted  to 
the  cultivation  of  the  soil,  every  man  were  accustomed  to 
build  his  own  houses  and  barns,  to  make  his  own  hats, 
shoes  and  clothes,  his  own  household  furniture  and  ag- 
ricultural instruments,  shoe  his  own  horses,  in  short,  to 
carry  on  every  branch  of  mechanical  labor  sufficiently  to 
supply  all  his  own  necessities,  it  is  apparent  at  once  that 
such  a  community  would  be  almost  entirely  deprived  of 
all  the  advantages  which  are  derived  from  skill.  Every 
one's  farm  must  be  greatly  neglected  and  could  yield 


40  ECONOMICS. 

only  scanty  products.  All  other  wants  would  be  very 
imperfectly  and  inadequately  supplied.  A  civilized  life 
would  be  impossible.  Every  family  would  be  poorly  fed 
because  farms  were  poorly  cultivated,  and  they  would  be 
very  badly  housed  and  clothed,  and  very  scantily  fur- 
nished in  every  department,  with  the  comforts  and  con- 
veniences of  life.  Every  thing  men  ever  did  in  such  a 
community  would  be  very  rudely  done,  without  any  skill, 
and  consequently  at  a  ruinous  cost  of  time  and  labor. 
Life  would  be  barbarous  and  wretched.  There  would 
perhaps  be  more  equality  than  in  more  civilized  commu- 
nities, but  it  would  be  equality  in  poverty  and  wretch- 
edness. 

Let  us  now  suppose  that  a  sufficient  number  of  men 
leave  farming  entirely,  and  devote  themselves  to  the  va- 
rious mechanical  trades,  to  supply  all  the  wants  of  that 
whole  community.  Families  will  now  be  provided  with 
all  the  comforts  and  conveniences  of  life.  Farmers  will 
be  farmers  only,  and  furnish  all  the  products  of  the  farm 
in  such  abundance,  that  they  can  supply  their  mechanics 
with  all  they  need  of  what  the  farm  produces,  and  still 
have  enough  for  their  own  families.  Every  mechanic 
will  devote  himself  to  his  own  trade  and  thus  acquire  the 
highest  skill  and  dexterity  in  it  of  which  he  is  capable, 
every  thing  will  be  produced  at  the  smallest  possible 
cost  of  labor,  and  all  products  will  be  as  cheap  and  as 
perfect  as  they  were  before  costly  and  rude.  A  complete 
revolution  has  been  effected.  Before,  every  thing  was 
done  without  skill,  now  nothing  is  done  without  skill, 
and  every  one  has  the  benefit  of  skill. 

As  wealth  and  population  increase,  what  was  origi- 
nally a  single  trade  will  be  subdivided  into  many. 
Builders  will  be  subdivided  into  carpenters,  masons, 
plasterers  and  painters ;  and  other  trades  after  the  same 
manner,  so  that  each  man  may  devote  himself  more  ex- 


DIVISION    OF   LABOR.  41 

clusively  to  those  processes  for  which  he  is  naturally 
best  fitted,  and  may  have  opportunity  to  acquire  the 
highest  possible  skill  in  the  single  process  which  he  has 
chosen  for  his  specialty.  In  all  progressive  civilization, 
this  subdivision  of  trades  and  professions  is  constantly 
going  on  and  indicates  constantly  increasing  skill  in  the 
various  departments  of  labor. 

§  34.  The  progress  of  modern  manufactures  has  de- 
veloped an  application  of  division  of  labor  till  recently 
little  known.  It  is  a  subdivision  of  the  processes  of  the 
same  trade.  When  for  example  the  working  of  metals 
had  been  divided  and  sub-divided  until  the  making  of 
pins  was  recognized  as  a  distinct  trade,  it  might  seem 
that  the  limit  of  possible  division  had  been  reached. 
But  the  making  of  a  pin  is  itself  divisible  into  many  dis- 
tinct processes.  The  wire  must  be  drawn,  straightened^ 
polished,  and  cut  into  pieces  of  proper  length.  Each 
pin  must  be  sharpened  and  headed,  and  placed  upon  the 
paper.  Each  of  these  processes  might  be  assigned  to  an 
operative,  who  should  conduct  it,  and  do  nothing  else.  At 
one  stage  in  this  branch  of  manufacture  this  arrangement 
was  carried  out  we  believe,  in  practice.  Since  the  in- 
troduction of  modern  machinery,  this  principle  has  been 
enormously  extended,  and  with  an  astonishing  increase 
of  the  efficiency  of  labor.  Mechanical  invention  itself 
has  scarcely  accomplished  greater  results  than  this  skill- 
ful distribution  of  labor  among  many  operatives  acting 
in  harmony  for  a  common  end.  The  results  thus  at- 
tained are  among  the  economic  wonders  of  this  modern 
age. 

§  35.  It  remains  to  point  out  the  reasons  of  the  great 
economic  advantage  thus  obtained. 

I.  The  principle  has  already  been  stated  that  when 
one  devotes  himself  exclusively  to  a  single  process,  he 
acquires  much  greater  skill  in  it  than  is  otherwise  possi- 


42  ECONOMICS. 

ble.  The  simpler  the  process  the  greater  the  skill  ac- 
quired. If  a  common  mechanic  were  to  attempt  to  do  a 
day's  work  in  heading  pins,  it  is  likely  he  would  finish 
but  a  small  number.  But  when  a  man  heads  pins  and 
does  nothing  else,  the  rapidity  of  his  execution  becomes 
something  wonderful.  It  is  like  the  dexterity  with  which 
the  accomplished  pianist  fingers  his  keys.  A  person  who 
has  not  the  skill  looks  on  with  astonishment. 

2.  If  all  the  processes  of  a  given  manufacture  must 
be  performed  by  the  same  individual,  he  must  take  time 
to  learn  them  all.  Perhaps  to  accomplish  himself  in  all 
parts  of  the  trade  he  must  serve  an  apprenticeship  of 
seven  years.  But  if  the  trade  is  divided  into  seven  dis- 
tinct processes,  and  each  process  allotted  to  a  single 
operative,  he  need  learn  but  one  of  the  seven,  and  can 
therefore  accomplish  himself  for  his  trade  by  an  appren- 
ticeship of  a  single  year.  Six-sevenths  of  the  time 
required  to  learn  the  trade  and  six-sevenths  of  the 
material  wasted  by  the  unskillfulness  of  the  learner 
would  thus  be  saved. 

3.  It  is  also  said  that  much  time  is  saved  which  would 
otherwise  be  spent  in  passing  from  one  process  to  an- 
other, especially  if  tools  are  to  be  adjusted,  or  a  furnace 
is  to  be  heated  up.  Some  recent  writers  claim,  that 
Adam  Smith  over-estimated  the  importance  of  this 
advantage. 

4.  Another  advantage  is  certainly  real  and  important. 
When  the  fabricating  of  a  given  product  is  thus  analyzed 
into  its  distinct  processes,  all  these  processes  will  not  be 
found  to  require  labor  of  the  same  grade  of  skill  and  effi- 
ciency. Some  will  require  the  highest  order  of  work- 
manship. These  may  be  assigned  to  workmen  who 
receive  the  highest  compensation.  Other  processes 
may  require  labor  of  only  the  lowest  grade,  and  there- 
fore receiving  only  the   lowest   rate  of  compensation. 


DIVISION   OF   LABOR.  43 

By  division  of  labor  each  process  may  be  compensated 
according  to  the  grade  of  workmanship  which  it  requires. 
But  if  one  man  must  perform  all  parts  of  the  work,  he 
must  be  paid  for  his  highest  skill  and  efficiency,  though 
employed  in  processes  in  which  the  cheapest  labor  would  ^ 
suffice.  Thus  division  of  labor  greatly  reduces  the  cost 
of  the  matured  product. 

It  is  also  important  to  mention,  that  in  this  way  di- 
vision of  labor  furnishes  suitable  employment  to  many 
persons  who  would  otherwise  have  no  employment  at  all, 
because  they  are  quite  inadequate  to  the  more  difficult 
parts  of  the  work.  Much  labor  is  thus  rendered  produc- 
tive which  would  otherwise  remain  unemployed.  Wo- 
men and  their  special  advocates  often  complain  that 
modern  economics  do  not  properly  reward  women's 
work.  This  subject  will  be  discussed  in  its  proper 
place.  It  is  evident  however  at  this  stage  of  our  discus- 
sion, that  to  division  of  labor  they  are  to  a  great  extent 
indebted  for  the  fact  that  they  have  any  employment  at 
all,  outside  of  the  domestic  circle. 

§  36.  Division  of  Labor  is  in  its  possible  application 
subject  to  several  important  limitations,  some  of  which 
are  the  following : 

1.  The  nature  of  the  process.  When  any  work  to  be 
done  has  been  so  analyzed  as  to  divide  it  into  the  great- 
est possible  number  of  distinct  processes,  and  each  of 
these  processes  has  been  allotted  to  an  individual  opera- 
tive, division  of  labor  can  be  carried  no  further.  If 
more  laborers  are  to  be  employed,  the  number  employed 
must  be  some  multiple  of  the  number  of  processes  into 
which  the  work  has  been  divided.  But  no  further  divis- 
ion of  labor  can  thereby  be  accomplished. 

2.  The  application  of  division  of  labor  may  also  be 
limited  by  the  wa7it  of  sufficient  capital.  If  a  man  has 
only  sufficient  capital  to  support  himself  and  supply  the 


4<K  ECONOMICS. 

tools  which  he  must  himself  use,  he  must  of  course  per- 
form all  the  work  with  his  own  hands.  This  is  the  rea- 
son why  so  little  division  of  labor  is  used  in  the  ruder 
stages  of  society,  when  little  capital  has  been  accumu- 
lated. The  savage  whose  only  capital  is  his  bow  and 
arrows  can  have  no  division  of  labor,  and  he  must  ad- 
vance many  stages  on  the  road  to  civilization  before  he 
can  make  any  considerable  use  of  it.  This  is  the  reason 
why  manufactures  cannot  be  successfully  conducted  till 
large  accumulations  of  capital  have  been  made.  No 
single  man  and  no  combination  of  men  which  can  be 
effected  in  the  earlier  stages  of  a  people's  progress  can 
command  for  the  purpose  a  sufficient  amount  of  capital 
to  procure  the  necessary  machinery  and  to  support  the 
requisite  number  of  laborers  and  the  requisite  variety  oi 
skill.  Peoples  that  are  in  such  a  condition  can  never 
compete  with  those  whose  capital  is  abundant.  The 
attempt  to  do  so  is  only  the  farce  of  the  child  playing  the 
man. 

3.  The  possible  application  of  division  of  labor  may 
also  be  limited  by  the  demand  for  the  product,  to  the 
fabrication  of  which  it  is  to  be  applied.  If  one  man 
working  by  himself  can  supply  the  whole  existing  de- 
mand, he  cannot  afford  to  resort  to  a  division  of  labor. 
It  may  be  that  two  men  dividing  the  work  between  them 
might  produce  three  times  as  much  product  as  one  man 
working  alone.  But  as  there  would  be  no  demand  for 
two-thirds  of  the  product  thus  furnished,  there  would  be 
no  advantage  in  producing  it.  For  this  reason  also,  di- 
vision of  labor  can  be  little  used  in  the  ruder  states  of 
society.  Population  is  sparse,  capital  is  scanty,  and 
therefore  the  demand  for  most  products  is  so  small  that 
it  can  be  supplied  without  much  division  of  labor.  As 
population  multiplies,  capital  increases  and  facilities  for 
communication  between  remote  districts  are  made  abun- 


DIVISION    OF    LABOR.  45 

dant  and  cheap,  the  demand  for  all  articles  of  comfort, 
beauty  and  luxury  will  be  constantly  multiplied,  and  di- 
vision of  labor  will  be  more  used,  and  higher  skill  in 
every  department  of  production  will  be  attained.  All 
men  will  be  more  skillful  in  their  work,  all  products  more 
abundant  and  of  better  quality,  and  the  whole  commu- 
nity more  civilized,  richer  and  happier. 

§  37.  It  is  stated  by  many  writers  that  the  principle 
of  division  of  labor  is  applied  between  nations  as  well  as 
between  individuals.  This  is  certainly  not  scientifically 
accurate.  Nations  are  not,  in  the  economic  sense,  la- 
borers. It  is  not  easy  to  see  that  they  have  any  econom- 
ic function,  except  to  secure  to  all  their  subjects  freedom 
to  exert  their  natural  powers  without  any  molestation, 
and  the  most  perfect  enjoyment  of  their  own  products. 
In  the  proper  place  it  will  be  shown,  that  for  this  service 
they  are  entitled  to  the  loyal  support  of  all  who  live 
under  their  protection. 

Division  of  labor  is  not,  however,  naturally  limited 
within  any  national  lines.  Like  every  other  element  of 
our  science  it  is  human,  not  national.  Those  laws  of 
human  nature  from  which  it  springs  act  without  the 
slightest  reference  to  the  boundaries  of  nations.  The 
law  holds  good  everywhere,  that  every  man  should  use 
the  products  of  the  highest  skill  and  the  greatest  natural 
advantages  for  the  supply  of  his  wants  wherever  they 
may  be  found.  Not  to  do  so,  tends  not  to  the  advance- 
ment of  civilization,  but  to  the  perpetuity  of  barbarism. 
Division  of  labor  however  occurs  in  all  cases,  not  be- 
tween one  nation  and  another,  but  between  individuals 
of  every  nation  irrespective  of  nationality.  We  send  our 
products  to  the  north  and  the  south,  to  the  east  and  the 
west  in  search  of  the  best  market  which  the  world  af- 
fords ;  and  we  receive  in  return  the  fruits  and  spices  of 
the  tropics,  the  manufactures  of  England  and  France^ 


46  ECONOMICS. 

and  the  furs  of  Russia  and  Sweden.  If  we  are  wise  we 
shall  procure  every  thing  where  it  can  be  procured  most 
cheaply,  and  in  greatest  perfection.  Such  a  division  of 
labor  among  all  the  inhabitants  of  the  earth  is  accordant 
with  the  intention  of  the  Creator  as  indicated  in  the  con- 
stitution of  man,  and  a  beautiful  illustration  of  the 
brotherhood  of  the  human  race.  Any  nation  incurs  a 
most  serious  responsibility  by  interfering  with  these 
fraternal  relations,  except  for  reasons  of  the  most  cogent 
necessity.  Whether  such  necessity  exists,  we  shall  in- 
quire in  the  proper  place. 

§  38.  Some  writers  are  inclined  to  attach  a  good  deal 
of  importance  to  what  they  have  called  the  Combination 
of  Labor.  This  is  either  simple  or  complex.  It  is  sim- 
ple when  several  laborers  combine  their  strength  to  do 
the  same  thing.  This  takes  place  when  something  is  to 
be  done  for  the  doing  of  which  the  powers  of  a  single 
individual  are  insufficient.  He  naturally  provides  for 
combining  the  efforts  of  other  laborers  with  his  own,  and 
thus  securing  sufficient  strength  to  accomplish  the  end 
he  has  in  view.  Such  combination  is  a  very  common 
occurrence  in  every  civilized  community,  and  is  so  per- 
fectly simple  and  natural,  and  so  much  a  matter  of 
course,  as  not  to  require  any  special  attention  in  this 
place. 

Complex  combination  of  labor  is  the  cooperation  of 
many  individuals  conducting  different  processes,  in  ac- 
complishing a  common  result.  Thus  the  cotton  planter 
in  Louisiana,  the  cotton  spinner  in  Manchester,  the  car- 
rier who  transports  the  cotton  from  the  planter  to  the 
manufacturer,  and  all  persons  engaged  in  fabricating 
machinery,  and  probably  many  other  classes  of  laborers, 
all  combine  their  labor  to  produce  a  single  yard  of  cotton 
cloth.  But  this  is  only  division  of  labor  viewed  under 
another  aspect.     If  the  movement  of  thought  is  from  the 


DIVISION    OF    LABOR.  47 

circumference  of  the  circle  towards  the  centre  where  the 
result  is  completed,  it  is  combination  of  labor ;  if  from  the 
centre  towards  the  circumference,  it  is  division  of  labor. 
The  combination  of  labor  sustains  the  same  relation  to 
the  division  of  labor,  that  the  distance  from  New  York  to 
Boston  does  to  the  distance  from  Boston  to  New  York. 

§  38^.  Writers  have  insisted  on  several  classifications 
of  labor  which  have  no  scientific  significancy,  and  there- 
fore embarrass  and  confuse  the  student  rather  than  in- 
struct him.  Ours  is  not  a  science  of  mere  classification, 
but  of  causes  and  laws  ;  and  no  generalization  is  of  any 
value  in  it  which  does  not  aid  in  the  discovery  or  the 
definition  of  causes  and  laws.  Of  this  character  is  the 
distinction  of  labor  as  that  of  the  body,  from  that  of  the 
mind.  All  human  labor,  even  the  simplest,  is  in  greater 
or  less  degree  the  labor  of  the  mind.  It  cannot  be  per- 
formed without  the  constant  exertion  of  human  intelli- 
gence. No  brute  animal  can  be  trained  to  the  simplest 
processes,  not  even  to  gather  and  pile  stones.  Mind 
dominates  over  it  all.  It  is  true  indeed  that  some  kinds 
of  labor  require  much  higher  intelligence  than  others, 
and  some  processes  are  purely  mental,  as  those  of  dis- 
covery and  invention.  But  this  is  a  consideration  of  no 
special  economic  significancy. 

In  like  manner,  the  division  of  laborers  into  the  three 
classes, — discoverers,  inventors,  and  operatives,  conducts 
to  no  important  results,  and  does  not  extend  our  knowl- 
edge of  the  forces  with  which  we  are  concerned.  A  man 
seldom  confines  himself  to  either  of  these  departments. 
Operatives  have  sometimes  made  the  most  valuable  in 
ventions,  and  inventors  have  often  been  discoverers  also. 
Much  the  same  may  be  said  of  the  division  of  industry 
into  the  three  departments  of  agriculture,  manufactures 
and  commerce.  Those  forces  and  causes  which  have 
already  been  explained  as  stimulating  and  aiding  pro- 


48  ECONOMICS. 

duction,  alike  pervade  and  dominate  them  all,  and  ac- 
count for  the  phenomena  which  they  present.  We  think 
therefore  that  by  insisting  on  these  distinctions  we 
should  perplex  and  confuse  rather  than  instruct  the 
student. 


PART  II 


EXCHANGE. 

CHAPTER  I. 

Value. 

§  39.  In  our  discussion  of  the  forces  concerned  in 
Production,  it  has  been  all  along  assumed  that  laborers 
must  to  a  very  large  extent  exchange  their  products  with 
each  other.  A  man  that  makes  hats  must  have  food 
and  clothing  for  other  parts  of  his  body  than  his  head. 
If  he  makes  nothing  but  hats,  he  must  supply  other  peo- 
ple with  hats,  and  receive  from  them  in  return  other 
things  which  he  needs  ;  or  his  hats,  except  an  occasional 
one  for  his  own  wear,  will  be  of  no  use  to  him.  We 
have  now  reached  that  point  in  the  development  of  the 
subject,  where  it  is  necessary  to  explain  the  nature  of 
exchange,  and  the  laws  by  which  it  is  governed. 

Definition.  Exchange  is  the  voiwitary  transfer  of  the 
ownership  of  some  item  of  wealth  for  the  ownership  of 
so?nething  else  regarded  by  both  parties  as  equally  desirable. 

It  is  believed  this  definition  will  be  found  to  be  ac- 
curate and  exhaustive,  and  in  perfect  consistency  with 
our  definition  of  wealth.  It  matters  not  whether  the  ex- 
3 


50  ECONOMICS. 

change  be  of  labor  for  labor,  or  of  labor  for  some 
product  of  labor,  or  of  one  product  of  labor  for  another, 
or  what  the  nature  of  the  products  to  be  exchanged  may 
be.  It  is  in  every  case  an  item  of  wealth  for  another 
item  of  wealth,  regarded  as  equally  desirable,  with  the 
voluntary  consent  of  both  owners. 

§  40.  As  soon  as  one  finds  himself  in  possession  of 
something  which  he  desires  to  exchange  for  something 
else  of  which  another  person  is  the  owner,  the  question 
at  once  occurs  to  him, — how  much  of  mine  must  I  give 
for  what  I  desire  of  his  ?  If  I  make  hats,  and  wish  to 
exchange  them  for  wheat,  the  question  is, — how  much 
wheat  for  a  hat  ?  That  for  which  one  is  inquiring 
when  he  asks  this  question,  is  expressed  by  the  word 
Value.  What  is  the  value  of  a  hat  ?  What  is  it  worth  ? 
We  can  proceed  no  further  in  the  development  of  the 
science  till  we  have  defined  this  word.  Nowhere  else 
has  so  much  confusion  of  thought  found  its  way  into 
the  discussions  of  economists,  as  in  respect  to  the  mean- 
ing of  this  word.  There  can  be  no  science  of  Econom- 
ics without  an  exact  and  scientific  definition  of  value. 
If  we  succeed  in  framing  such  a  definition,  the  remain- 
ing part  of  the  task  which  we  have  undertaken  will  be 
comparatively  easy  and  plain.  If  we  fail  in  the  attempt 
it  were  better  to  prosecute  the  undertaking  no  further, 
for  it  can  result  in  nothing  but  confusion  and  endless 
controversy. 

§  41.  We  cannot  however  give  the  needed  definition 
of  value,  till  we  have  introduced  to  the  reader's  notice 
another  great  law  of  nature  of  which  we  have  hitherto 
said  nothing.  We  refer  to  the  law  of  competitio7i. 
Through  the  remaining  portion  of  our  science,  this  law 
must  be  our  constant  guide. 

The  law  of  competition  results  directly  from  the 
fundamental  law,  out  of  which  we  said  in  the  outset 


VALUE.  5i 

the  whole  science  should  be  developed.  Every  man 
owns  himself  and  all  which  he  produces  by  the  volun- 
tary exertion  of  his  own  powers.  What  he  owns  he  not 
only  may,  but  he  always  will  use  as  he  desires.  It  fol- 
lows of  course  that  what  he  does  not  want  himself,  but 
desires  to  exchange  for  some  object  of  desire  owned  by 
another,  he  will  so  exchange  as  to  obtain  for  it  as  much 
gratification  of  his  own  desires  as  he  can.  If  he  wants 
to  exchange  hats  for  wheat,  he  will  inquire  what  is  the 
largest  quantity  of  wheat  which  any  one  will  give  him 
for  a  hat,  and  with  the  man  that  offers  him  the  largest 
quantity  he  will  exchange  in  preference  to  any  other. 
He  will  refuse  to  make  any  exchange  at  all  till  he 
thinks  he  has  found  the  man  that  will  give  him  more 
than  any  one  else,  or  at  least  as  much.  It  is  as  much 
a  law  of  nature  that  exchanges  should  be  conducted  in 
this  way,  and  not  in  any  other,  as  it  is  that  the  planets 
should  move  in  elliptical  orbits,  and  not  along  the 
bounding  lines  of' a  square  or  parallelogram.  When 
men  conduct  exchanges  thus,  they  are  not  acting 
meanly  or  selfishly,  but  they  are  obeying  a  law  of  na- 
ture, as  truly  as  a  heavy  body  obeys  a  law  of  nature  by 
falling  when  it  is  unsupported.  This  law  of  nature  is 
competition.     We  propose  the  following  : 

Definition,  Competition  is  that  law  of  hu7nan  nature 
by  which  every  ma7i  who  makes  an  exchange  will  seek  to 
obtain  as  much  as  he  can  of  the  wealth  of  another  for  a 
given  amount  of  his  own  wealth. 

It  is  to  be  kept  in  mind  that  we  are  not  teaching 
ethics.  We  do  not  say  that  a  man  has  a  right  to  buy 
as  cheaply  as  he  can,  and  sell  as  dearly  as  he  can,  but 
that  by  a  law  of  his  nature  he  not  only  will  but  must 
do  so.  It  is  not  a  case  of  moral  choice  at  all.  Where 
two  objects  of  desire  do  not  differ  at  all  in  kind,  but 
only  in  quantity,  it  is  as  natural  for  us  to  accept  the 


53  ECONOMICS. 

greater  rather  than  the  less,  as  for  a  stone  dropped  from 
the  hand  to  fall  to  the  ground.  We  do  not  mean  of 
course,  that  the  buyer  will  bring  every  sort  of  influ- 
ence true  or  false  to  bear  on  the  seller's  mind,  to  in- 
duce him  to  sell  cheaply,  or  that  he  will  seek  to  exert 
upon  him  any  influence  at  all.  All  this  our  science 
turns  over  to  the  teacher  of  ethics.  Competition 
simply  assumes  that  every  man  knows  his  own  mind, 
and  that  he  who  has  any  thing  to  exchange  inquires 
who  will  give  most  for  it,  and  that  he  who  wishes 
to  get  something  by  exchange  inquires  who  will  sell  it 
most  cheaply,  and  buys  and  sells  accordingly. 

If  any  one  says  this  is  not  a  law  of  nature,  that  a 
man  will  often  sell  to  one  man  more  cheaply  than  he 
will  to  another,  the  answer  is,  that  if  such  a  case  oc- 
curs, it  is  only  because  the  seller  has  some  special  re- 
gard for  the  man  with  whom  he  prefers  to  exchange, 
and  is  willing  to  take  as  a  part  of  the  gratification 
which  he  is  to  get  by  the  exchange,  the  satisfaction  of 
doing  him  a  favor.  It  is  no  exception  to  the  univer- 
sality of  the  law.  He  still  gets  as  much  gratification 
by  the  exchange  as  he  can. 

It  matters  not  whether  the  thing  to  be  exchanged  is 
the  product  of  the  owner's  personal  labor,  or  of  some 
other  one's  labor  of  which  he  has  obtained  the  owner- 
ship by  gift  or  exchange,  or  whether  he  wishes  to  ex- 
change his  labor  for  some  other  man's  labor,  or  his  labor 
for  some  product  of  the  labor  of  another.  In  either 
case  the  law  holds  in  all  its  force.  In  competition  we 
have  a  law  which  is  as  pervasive  of  the  whole  science 
of  economics,  as  the  law  of  gravitation  is  of  the  science 
of  physical  astronomy.  He  who  is  engaged  in  endeav- 
oring to  construct  an  economic  system  from  which  com- 
petition shall  be  excluded,  has  on  his  hand  an  attempt 
which  is  just  as  absurd  and  impossible,  as  to  construct 


VALUE.  53 

a  machine  from  which  all  influence  of  gravitation  and 
friction  shall  be  excluded.     But  more  of  this  hereafter, 

§  42.  Definition,  Value  is  relative  desirableness  as 
ascertained  by  competition. 

Value  in  its  technical  use  is  always  a  relative  term. 
Nothing  has  intrinsic  value.  It  is  an  absurdity  in 
terms.  In  popular  language,  we  speak  of  the  intrinsic 
value  of  a  thing  without  impropriety.  We  mean  of 
course  its  utility.  But  utility  does  not  imply  value  in 
the  strict  sense.  What  is  more  useful  than  atmospheric 
air.?  But  it  has  no  economic  value.  It  will  bring 
nothing  in  the  market.  When  we  speak  of  the  value  of 
a  thing  in  the  technical  sense,  we  mean  that  for  which 
it  can  be  exchanged.  If  it  will  bring  nothing  in  ex- 
change, no  matter  how  much  labor  has  been  laid  out 
on  it,  no  matter  how  useful  it  is,  in  the  strict  sense  of 
the  word  it  has  no  value. 

There  are  certain  words  with  the  use  of  which  it  is 
impossible  to  dispense,  which  it  is  necessary  to  employ 
with  technical  accuracy.  Before  proceeding  further  we 
will  therefore  define  them. 

Definition,  Cost  is  the  amount  of  labor  and  capital 
expended  on  any  product. 

Definition,  Price  is  the  value  of  any  thing  as  com- 
pared with  some  specific  things  regarded  as  a  fit  stand- 
ard by  which  all  other  values  are  supposed  toj^  measured. 

That  specific  thing  in  comparison  with  which  price  is 
estimated  is  money,  of  which  we  shall  speak  hereafter. 

Definition,  Supply  and  Demand  are  correlative 
ierms^  indicating^ — the  latter^  the  desire  that  exists  for 
any  article  of  exchange  as  manifested  by  readiness  to  offer 
other  things  for  ity  and  the  former^  the  amount  of  the 
article  demanded  which  is  ready  at  any  time  to  be  ex- 
changed. 

§  43.  Economists  have  been  much  at  variance  re- 


54  ECONOMICS. 

specting  the  relation  of  value  to  cost.  It  is  therefore 
necessary  to  examine  that  question.  Value  has  no 
necessary  relation  to  cost  at  all.  Cost  has  no  power  to 
control  or  determine  value.  Capital  and  labor  will 
render  nothing  valuable  except  as  they  make  it  capable 
of  gratifying  human  desire.  But  men  will  expend  labor 
and  capital  only  in  producing  that  which  they  them- 
selves regard  as  more  desirable  than  the  labor  and  capi- 
tal expended,  or  which  they  believe  others  will  so  re- 
gard. One  can  command  nothing  in  exchange  for  any 
product  merely  in  consideration  of  the  cost  of  it.  The 
milliner  who  has  a  large  supply  of  ladies'  bonnets,  will 
plead  in  vain  in  justification  of  her  high  prices  the  cost 
of  her  wares,  after  the  fashion  has  changed.  But  noth- 
ing will  continue  to  be  produced  which  for  long  periods 
is  found  to  be  of  less  value  than  the  cost.  Men  are 
not  fond  of  laboriously  throwing  away  either  labor  or 
capital.  On  the  other  hand,  nothing  can  for  long  peri- 
ods maintain  a  value  which  is  above  cost,  for  some- 
body will  always  be  found  ready  to  produce  it  at  cost. 
Competition  will  therefore  always  insure  the  gravita- 
tion toward  cost  of  the  value  of  all  the  great  permanent 
utilities  of  life.  If  a  sudden  demand  springs  up  for 
any  article  exceeding  the  supply,  its  value  will  be  raised, 
and  of  course  its  price  enhanced.  Labor  and  capital 
employed  in  producing  it  will  be  more  remunerative 
than  usual,  and  more  of  both  will  be  invested  in  in- 
creasing the  supply.  This  will  go  on  till  the  supply 
and  demand  are  equalized.  The  enhancement  in 
price  however  will  in  most  cases  not  be  permanent,  for 
reasons  which  will  be  explained  hereafter. 

§  44.  No  test  of  value  other  than  that  furnished  by 
competition  is  possible.  As  in  mechanics  weight  is  our 
only  available  test  of  quantity  of  matter,  so  in  econo- 
mics competition  is  our  only  test  of  value.     The  pro- 


VALUE.  55 

position  to  determine  what  a  thing  is  really  worth  with- 
out reference  to  what  it  will  command  in  exchange,  is 
an  absurdity  even  in  terms.  Men  may  have  a  judg- 
ment of  the  value  of  a  horse  without  offering  him  for 
exchange,  but  if  it  is  worthy  of  any  confidence  it  must 
be  founded  on  what  it  is  known  other  horses  of  equal 
desirableness  have  been  sold  for.  It  must  go  on  the 
assumption  that  people  will  regard  another  horse  as 
equally  desirable  with  those  which  have  recently  been 
sold.  But  one  can  never  know  it  till  the  test  of  com- 
petition has  been  appealed  to.  The  price  current  is 
not  the  judgment  of  any  man  however  sagacious,  what 
the  commodities  mentioned  in  it  ought  to  be  worth, 
but  the  record  of  the  fact,  what  they  were  actually  ex- 
changed for. 

It  is  true  that  valuable  property  may  be  offered  for 
exchange,  in  circumstances  in  which  no  one  desires  it 
at  the  price  which  is  usually  paid  for  a  like  article. 
And  yet  the  owner  may  have  so  strong  a  desire  to 
obtain  something  else  in  exchange  for  it,  that  he  would 
be  glad  to  part  with  it  at  almost  any  price  which  any 
one  will  give  him.  It  may  in  that  case  be  said  that  he 
exchanges  his  property  for  much  less  than  its  real  value. 
But  if  the  language  has  any  meaning,  it  is  only  that  the 
usual  value  is  greater  than  that  at  which  he  exchanged 
it,  and  that  the  belief  is  confidently  entertained,  that  at 
a  not  distant  day,  the  demand  for  it  will  increase  so 
that  it  will  command  in  exchange  more  than  was  re- 
ceived for  it.  That  however  does  not  show  that  the 
present  value  was  not  precisely  what  was  obtained  for 
it.  The  anticipated  future  value  of  it  may  differ  greatly 
from  the  present.  Probably  the  purchaser  did  not  want 
it  for  his  own  use,  and  was  only  induced  to  purchase  it, 
because  he  believed  it  would  command  more  in  ex- 
change at  a  future  time  than  now.     He  purchased  foi 


56  ECONOMICS. 

the  sake  of  gain  by  a  future  exchange,  and  not  to  satisfy 
any  present  want.  Its  present  value  is  what  it  will  ex- 
change for  now,  its  future  value  will  depend  on  what  it 
will  exchange  for  at  a  future  time. 

§  45.  It  may  seem  to  some  a  valid  objection  to  the 
universality  of  the  law  of  competition,  that  many  trans- 
actions of  exchange  are  regulated  by  custom  or  law  and 
not  by  competition.  If  for  example  I  employ  a  licensed 
hackman,  the  price  which  I  must  pay  him  is  regulated 
by  law.  Rents  in  many  different  countries  are  regu- 
lated by  custom,  which  has  been  handed  down  through 
many  successive  generations,  and  with  which  competi- 
tion does  not  interfere.  The  rate  of  interest  on  money 
has  been  and  is  regulated  by  law.  In  these  and  many 
other  cases,  competition  has  apparently  and  in  some  of 
them  really,  no  place.  This  is  not  the  place  to  con- 
sider some  of  the  questions  involved  in  the  examples 
just  given.  Rents  and  interest  on  money  belong  to 
another  part  of  the  subject.  But  it  will  be  shown  in 
the  proper  place,  that  whenever  rent  is  regulated  other- 
wise than  by  competition,  it  is  because  the  fundamental 
laws  of  our  science  have  been  utterly  disregarded.  An 
immemorial  custom  is  a  law.  In  such  cases  the  nom- 
inal proprietor  of  the  land  is  only  the  partial  owner 
of  it.  The  tenant  is  also  a  partial  owner.  The  pro- 
prietor owns  the  right  of  disposing  of  one-half  or  one- 
third  of  the  produce,  not  the  right  of  treating  as  his 
own  and  disposing  at  his  pleasure  the  land  and  all  its 
utilities.  The  tenant  is  also  a  partial  owner.  He  has 
a  right  to  appropriate  a  certain  share  of  the  profits  of 
the  land.  Our  science  has  nothing  to  do  with  such  an 
order  of  things.  Those  natural  forces  with  which  it 
has  to  do  have  no  opportunity  to  act.  The  laws  of 
human  nature  are  superseded  by  a  custom  which  origi- 
nated far  back  in  ages  of  barbarism. 


VALUE.  57 

Much  the  same  may  be  said  of  laws  regulating  the 
interest  on  money.  They  are  in  direct  conflict  with 
the  law  of  ownership.  So  our  science  must  regard  and 
treat  them.  They  assume  to  forbid  the  owner  of  prop- 
erty to  enjoy  and  appropriate  the  full  benefit  of  it. 
The  economist  can  not  deal  with  them  in  any  other 
aspect.  We  must  however  add  that  for  the  most  part 
they  are  a  dead  letter  on  the  statute  book,  quite  disre- 
garded in  practice. 

As  to  the  case  of  the  licensed  hackman,  he  has  made 
a  contract  with  the  municipal  government  to  carry  pas- 
sengers at  given  rates,  and  has  paid  for  the  privilege, 
and  is  therefore  bound  to  fulfill  the  contract  he  has 
made.  If  he  will  surrender  his  license  and  the  city 
endorsement  which  that  gives  him,  he  may  then  regu- 
late his  charges  by  competition  without  any  interfer- 
ence of  the  law. 

The  founder  of  a  science  becomes  illustrious  in  suc- 
ceeding ages,  and  justly.  Yet  it  is  often  true,  that  the 
reason  why  the  foundations  of  the  science  were  not  laid 
and  its  superstructure  reared  in  previous  generations,  is 
found  in  the  fact,  that  in  that  age  for  the  first  time  the 
conditions  of  the  possibility  of  the  science  had  existed. 
Physical  astronomy  was  not  possible,  till  the  labors  of 
Tycho  Brahe  and  others  had  furnished  a  vast  accumu- 
lation of  observations,  and  Kepler  had  discovered  the 
laws  of  planetary  motion.  For  like  reasons  our  science 
was  scarcely  possible  before  the  time  of  Adam  Smith. 
Labor  and  capital  were  not  sufficiently  emancipated 
from  the  despotic  interference  of  governments,  and  the 
tyranny  of  immemorial  custom,  to  manifest  the  laws  by 
which  they  are  governed  in  a  free  system.  From  that 
barbarism  of  the  earlier  ages,  many  economic  elements 
have  not  even  yet  emerged,  or  if  at  all,  only  in  a  few 
favored  countries.  Some  of  the  examples  given  above 
3* 


58  ECONOMICS. 

are  illustrations  of  this  remark.  It  is  only  in  countries 
in  which  the  private  ownership  of  land  is  understood  and 
recognized  by  the  laws  regulating  exchanges  and  inherit- 
ance, that  the  theory  of  rent  can  be  successfully  studied ; 
and  the  natural  laws  which  govern  interest  are  never 
very  apparent,  except  in  countries  where  the  govern- 
ment is  wise  enough  to  abstain  from  interfering  with  it, 
or  else  the  people  intelligent  enough  to  treat  the  statutes 
which  interfere  with  it  as  a  nullity.  In  this  view  of 
things,  it  is  perhaps  not  wonderful,  that  the  science  of 
economics  has  not  reached  its  perfection  in  the  first 
century  of  its  existence. 


CHAPTER  II. 
Fluctuations  of  Value. 


§  46.  The  general  aspect  presented  to  the  unthink- 
ing mind  by  those  fluctuations  of  value  which  are 
always  going  on  around  us,  is,  very  analogous  to  the 
impression  made  upon  us  by  the  wanderings  of  the 
moon,  or  the  varying  directions  and  strength  of  the 
atmospheric  currents,  which  we  daily  experience.  In 
the  previous  chapter  we  explained  the  law  of  competi- 
tion, and  showed  that  it  is  the  force  which  always  con- 
trols and  measures  value.  It  is  our  intention  in  this 
chapter  to  show  how  competition  explains  and  accounts 
for  the  seemingly  capricious  fluctuations  of  value  which 
are  constantly  going  on  around  us.  As  in  the  commer- 
cial world  all  values  are  estimated  by  comparison  with 
a  common  standard,  money,  and  as  the  value  of  any 
article  estimated  in  money  is  called  its  price,  we  shall 


FLUCTUATIONS   OF   VALUE.  59 

in    this  chapter   conform  to   this  popular  usage,  and 
employ  the  word  price  instead  of  value. 

All  the  fluctuations  of  price  which  can  occur  are 
the  results  of  one  of  two  causes,  viz. 

1.  Variation  of  the  cost  of  Production. 

2.  Variation  of  the  ratio  between  Supply  and  De- 
mand. 

The  cost  of  Production  may  be  diminished  in  vari- 
ous ways. 

First,  By  rendering  labor  more  efficient.  This  may 
be  done  by  improvements  in  machinery^  more  perfect  divis- 
ion of  labor ^  or  better  methods  of  applying  it.  The  result 
in  all  these  cases  must  be  to  reduce  the  price  of  the 
product.  If  a  single  producer  could  introduce  any  of 
these  improved  methods,  and  confine  the  use  of  them  to 
his  own  operations,  he  might  appropriate  all  the  advan- 
tage derived  from  them  to  himself,  by  exchanging  his 
product  at  the  same  prices  which  others  receive,  who 
do  not  use  the  improved  methods.  But  such  secrets 
cannot  be  kept,  and  society  offers  to  the  inventor  of 
any  such  improvement  a  sufficient  inducement  in  the 
form  of  a  patent  right,  to  disclose  it  to  the  general  pub- 
lic. Competition  then  begins  at  once  to  perform  its 
office,  and  reduces  prices  till  cost  and  value  are  equal- 
ized. There  will  never  be  wanting  those  who  will  be 
eager  to  produce  a  commodity  at  a  price  equal  to  the 
cost  of  production. 

The  consequence  must  be  the  cheapening  of  the  com- 
modity whose  cost  of  production  has  been  thus  diminished 
to  the  general  public,  and  thus  all  men  will  share  the 
benefits  of  every  new  invention  by  which  the  efficiency 
of  labor  is  increased.  The  reduction  of  the  price  of 
the  commodity  will  proportionally  increase  the  demand 
for  it.  The  reason  of  this  may  easily  be  rendered  obvi- 
ous.    While  the  price  was  high  none  but  the  wealthy 


6c  ECONOMICS. 

could  afford  to  use  it.  As  its  price  is  reduced  the 
wealthy  themselves  will  use  it  more  freely  and  for  pur- 
poses for  which  it  was  not  before  employed,  and  persons 
in  moderate  circumstances  will  be  able  to  afford  it. 
The  poor  and  those  of  limited  means  are  always  many 
times  more  numerous  than  the  rich,  and  as  by  reducing 
the  cost  of  production  any  commodity  is  cheapened,  it 
finds  its  way  into  the  homes  of  thousands  and  perhaps 
of  millions  who,  at  its  former  high  price,  would  have 
been  entirely  forbidden  its  use.  Competition  reduces 
price,  till  what  used  to  be  confined  to  the  homes  of  the 
rich,  becomes  abundant  in  the  humble  dwellings  of  the 
comparatively  poor. 

It  should  however  be  remarked  in  this  place  that 
such  changes  in  value  as  those  described  in  the  pre- 
ceding paragraph  have  not  hitherto  in  the  history  of 
the  world  occurred,  except  in  relation  to  commodities  which 
must  be  considered  rather  as  luxuries  than  as  necessaries 
of  life.  Should  they  ever  occur  in  respect  to  such 
commodities  as  strictly  necessary  food  and  clothing,  the 
occurrence  would  produce  a  revolution  in  the  fundamen* 
tal  conditions  of  human  life  which  it  is  not  likely  can 
ever  take  place.  We  have  already  shown  in  a  previous 
chapter  that  from  the  very  nature  of  the  labor  employed 
in  agriculture,  it  is  highly  improbable  that  its  efficiency 
can  ever  be  increased  by  invention  in  any  such  degree 
as  has  already  been  attained  to  in  other  departments  of 
industry ;  and  from  agriculture  the  necessaries  of  life 
are  chiefly  obtained.  This  subject  will  be  further  con- 
sidered in  connection  with  the  subject  of  Rent. 

Second,  The  cost  of  producing  any  commodity  in 
any  given  place  may  be  diminished  by  increasi?ig  the 
facilities  of  communication  with  the  rest  of  the  world.  The 
cost  of  any  commodity  at  any  particular  place  is  the 
cost  of  producing  it  added  to  the  cost  of  transportation. 


FLUCTUATIONS   OF   VALUE.  6l 

If  by  means  of  increased  facilities  for  transportation, 
the  producers  of  any  commodities  in  remote  places  are 
able  to  bring  their  products  into  the  market  at  a  less 
cost  than,  that  of  producing  them  in  the  immediate 
vicinity,  they  will  be  able  to  undersell  the  near  pro- 
ducers, and  reduce  the  price  of  the  article. 

Increased  facilities  for  bringing  into  any  market  the 
products  of  distant  regions  may  be  provided,  by  remov- 
ing either  artificial  or  natural  obstacles.  It  may  be 
that  the  laws  of  a  country  have  hitherto  been  such  as 
to  prohibit  the  introduction  of  foreign  products.  The 
removal  of  these  prohibitions  will  of  course  enable  for- 
eign producers  to  compete  with  those  at  home,  and  re- 
duce the  price  of  the  commodities  in  the  market.  Thus 
the  repeal  of  the  English  corn  laws  enabled  all  the 
corn-growers  of  the  world  to  compete  with  those  of 
England  in  her  markets.  If  the  result  has  not  been 
the  reduction  of  the  price  of  grain  in  England,  it  is  only 
because  the  increase  of  her  population  has  been  so 
rapid  as  to  create  a  demand  for  the  additional  supply 
thus  furnished,  and  keep  the  price  nearly  stationary. 
It  may  yet  happen,  that  the  pressure  of  foreign  grown 
grain  upon  the  markets  of  England  may  be  such,  as 
actually  to  reduce  the  price  of  the  food  of  her  people. 

The  same  result  may  be  secured  by  removing  natural 
obstructions  and  providing  the  ?neans  of  cheaper  and  more 
rapid  transportation.  This  is  abundantly  illustrated  by 
the  history  of  transportation  in  our  own  country.  As 
a  consequence  of  our  greatly  improved  modes  of  trans- 
portation, the  productions  of  regions  a  thousand  miles 
in  the  interior  of  the  continent  are  offered  in  the  mar- 
kets of  the  Atlantic  sea-coast,  at  prices  which  are  often 
below  the  cost  of  producing  them  in  the  immediate 
vicinity  of  those  markets,  and  the  price  of  agricultural 
products  in  the  markets  of  Great  Britain  is  to  a  consid- 


6a  ECONOMICS. 

erable  extent  controlled  by  the  competition  of  the  pro- 
ducts of  the  interior  of  North  America  and  even  of  the 
Pacific  Coast.  The  price  of  grain  in  our  Atlantic  cities 
and  in  the  markets  of  England  and  Europe  can  never 
again  depend  on  the  resources  of  their  immediate  vicin- 
ity, but  on  the  productions  of  the  whole  earth.  Practi- 
cal economy  is  becoming,  like  the  science  itself,  univer- 
sal and  human.  The  competition  of  the  world  controls 
the  markets  of  all  civilized  countries. 

§  47.  There  are  various  causes  by  which,  in  par- 
ticular cases,  the  cost  of  production  may  be  increased. 
They  may  however  be  summed  up  under  the  single 
statement  that  it  may  become  necessary  to  derive  sup- 
plies for  human  want  from  sources  involving  a  greater 
outlay  of  labor  and  capital.  For  example,  a  mineral 
may  be  needed,  the  supply  of  which  comes  only  from 
mines  the  working  of  which  is  constantly  becoming 
more  costly ;  or  if  new  mines  are  discovered,  they  may 
be  in  reginos  so  remote  from  the  place  of  consumption, 
or  so  difficult  of  access,  that  their  products  cannot  be 
cheaper  than  the  product  of  the  mines  before  known. 
The  case  may  occur  that  no  new  mines  of  gold  and 
silver  may  be  discovered  for  a  long  time  to  come,  and 
that  within  a  generation  or  two,  the  rich  surface  min- 
ing of  California,  Australia  and  the  Rocky  Mountains, 
may  be  quite  exhausted,  so  that  the  future  supply  of 
gold  and  silver  must  be  derived  from  deep  mines,  re- 
quiring an  immensely  greater  expenditure  of  labor  and 
capital.  In  this  way  it  may  happen  that  the  supply  of 
gold  and  silver,  the  cost  of  which  has  been  greatly 
diminished  by  the  discoveries  of  the  last  thirty  years, 
may  for  generations  to  come  be  obtained  at  constantly 
increasing  cost.  The  point  of  lowest  depression  in  the 
value  of  gold  and  silver  may  soon  be  reached,  from 
which  point  onwards  for  an  indefinite  future,  constantly 


FLUCTUATIONS    OF    VALUE.  63 

increasing  cost  may  cause  steadily  advancing  value  of 
the  precious  metals.  The  effect  of  such  changes  in  the 
value  of  gold  and  silver  will  be  discussed  in  connec- 
tion with  the  subject  of  money. 

§  48.  It  remains  to  point  out  the  influence  of  a 
variation  of  the  ratio  of  supply  and  demand  on  prices.  In 
speaking  of  the  ratio  of  supply  and  demand  we  of  course 
mean,  not  that  demand  or  desire  can  sustain  a  ratio  to 
that  which  supplies  it,  but  the  ratio  of  the  quantity 
ready  to  be  exchanged  to  the  quantity  requisite  in  order 
that  all  may  be  supplied  who  are  able  and  willing  to 
offer  the  equivalent. 

First,  The  ratio  of  supply  to  demand  may  be  in- 
creased either  temporarily  or  permanently.  If  the 
commodity  in  question  is  one  of  permanent  utility  and 
desirableness,  the  effect  will  be  only  temporary.  As 
the  supply  exceeds  the  demand  sellers  will  underbid 
each  other  and  prices  will  fall.  The  effect  of  this  will 
be  two-fold.  Fall  in  price  on  the  one  hand  will  in- 
crease demand.  Those  who  would  not  purchase  at  the 
higher  price,  will  be  ready  to  purchase  at  the  lower. 
This  will  tend  to  equalize  supply  and  demand.  On 
the  other  hand  if  supply  is  still  in  excess  the  motive  to 
produce  is  diminished.  Production  will  be  slackened. 
Capital  and  labor  will  be  withdrawn  from  the  trade, 
until  supply  and  demand  are  equalized. 

If  the  demand  is  dependent,  not  on  any  permanent 
utility  or  desirableness^  but  on  some  caprice  or  fashion, 
supply  and  demand  will  become  more  and  more  unequal, 
the  demand  will  rapidly  decline  until  the  production  of 
the  supply  entirely  ceases,  and  the  commodity  is  re- 
moved from  the  market  altogether. 

Second,  The  ratio  of  supply  to  demand  may  also/be 
diminished  either  temporarily  or  peri7ianently.  If  the 
fluctuation  is  only  temporary,  it  will  be  re-adjusted  by 


64  ECONOMICS. 

the  law  of  competition  acting  precisely  in  the  mannei 
just  described.  But  if  it  results  from  permanent 
causes,  three  distinct  cases  arise,  each  of  which  must 
be  considered  by  itself.  One  thing  is  common  to  all 
three  of  the  cases.  The  demand  constantly  tends  to 
exceed  the  supply.  The  first  case  is  that  in  which  the 
supply  can  be  increased  without  increasing  the  cost  of 
production.  This  is  the  case  of  most  manufactured 
articles.  All  that  is  necessary  to  an  indefinite  increase 
of  the  supply  of  these  is  to  employ  for  the  purpose  a 
greater  amount  of  labor  and  capital.  Under  the  con- 
ditions in  which  the  demand  for  manufactured  articles 
is  steadily  increasing,  both  labor  and  capital  are  increas- 
ing also,  and  seeking  new  modes  of  employment.  There 
is  therefore  in  the  economic  system,  a  provision  for  the 
increase  of  the  supply  of  such  commodities  to  respond 
to  any  demand  which  may  ever  arise,  without  increase 
of  cost.  It  is  true  that  such  an  increase  may  raise  the 
price  of  materials,  but  the  cost  of  the  material  in  most 
cases  bears  so  small  a  ratio  to  the  whole  cost  of  the 
product,  that  a  considerable  increase  of  the  cost  of  the 
material  would  scarcely  affect  the  cost  of  the  product 
appreciably.  On  the  other  hand  a  constantly  growing 
demand  will  facilitate  production  upon  a  larger  scale, 
and  therefore  with  increasing  economical  advantage. 
It  will  also  stimulate  invention  to  devise  better  methods 
of  assisting  and  applying  labor,  better  machinery  and 
more  perfect  economy  in  every  department ;  and  these 
advantages  will  probably  much  more  than  compensate 
for  any  increase  in  the  cost  of  raw  material.  Nature's 
provision  is  therefore  perfect  for  furnishing  a  supply 
of  the  comforts,  conveniences  and  beauties  of  life  to 
any  increase  of  population. 

To  this  view  of  the  case  there  might  seem  to  be  ont 
objection.     It  may  seem  probable  that  in  so  great  an  in- 


FLUCTUATIONS   OF   VALUE.  65 

crease  of  manufacturing  industry,  the  supply  of  some 
article  of  essential  importance  to  the  process  may  fail,  or 
become  so  expensive  as  greatly  to  increase  the  cost  of 
the  product.  For  example  should  the  English  coal  fields 
approach  exhaustion,  the  cost  of  coal  might  be  so  much 
advanced  as  seriously  to  increase  the  price  of  manufac- 
tured articles.  But  it  must  be  borne  in  mind,  that  our 
science  is  not  English  but  universal.  The  effect  of  such 
an  occurrence  would  be  only  to  transfer  the  manufactures 
affected  by  the  change  to  other  localities  where  fuel  is 
cheap  and  abundant.  Whenever  in  any  country  the  con- 
ditions of  cheap  manufacturing  no  longer  exist,  its  man- 
ufactures will  no  longer  be  able  to  compete  with  those 
of  other  countries  in  the  markets  of  the  world,  and  it  will 
soon  be  obliged  to  deliver  over  the  trade  to  others  who 
possess  the  requisite  conditions. 

§  49.  The  second  case  to  be  considered  is  that  of  products 
the  supply  of  which  can  not  be  increased,  except  at  an  in- 
creased cost  of  production.  The  reason  is  that  some  of  the 
conditions  of  production,  perhaps  all  of  them,  must  be 
derived  from  sources  of  supply  requiring  a  greater  amount 
of  capital  and  labor  to  be  employed  in  working  them. 
This  case  therefore  is  identical  with  that  examined  in 
§  47.  Mr.  Fawcett  claims  that  the  principle  stated  in 
that  section  holds  good  in  respect  to  all  agricultural  and 
mmeral  products.  With  certain  modifications  in  his 
modes  of  statement,  which  will  be  pointed  out  when  we 
come  to  speak  of  Ricardo's  theory  of  rent,  this  might  be 
true  of  a  single  country  like  England,  already  far  ad- 
vanced towards  maturity  of  her  civilization,  on  the  sup- 
position that  she  could  receive  no  supplies  from  the  rest 
of  the  world.  But  considering  England  simply  as  a  small 
part  of  the  world,  and  her  people  only  as  a  fraction  of 
the  human  race,  the  view  has  no  approximation  to  cor- 
rectness.    The  agricultural  productions  of  the  United 


66  ECONOMICS. 

States  have  been  doubled  within  a  few  years,  without 
any  appreciable  increase,  we  suspect  indeed  with  an  ab 
solute  diminution,  of  the  cost  of  production.  They  are 
apparently  capable  of  being  increased  by  a  much  greater 
multiplier  within  a  few  years  to  come,  and  still  without 
increased  cost  of  production.  The  quantity  of  agricul- 
tural products  offered  in  the  markets  of  England  may  be 
increased  in  the  same  manner,  to  an  extent  to  which  no 
one  is  at  present  able  to  assign  any  limit.  Areas  of  fer- 
tile land  in  comparison  with  which  the  whole  surface  of 
Britain  is  simply  insignificant,  exist  both  in  this  and  in 
other  countries,  which  are  now  quite  uncultivated,  and 
which  will  only  remain  so  till  they  can  be  brought  into 
cultivation  without  depressing  the  price  of  agricultural 
products  below  the  rates  which  prevail  at  present.  Any 
nation  which  like  England  opens  its  ports  to  corn  pro- 
duced in  whatever  nation,  need  have  no  apprehension 
of  any  increased  costliness  of  such  agricultural  products 
as  can  be  brought  to  her  from  beyond  the  seas.  Her 
increasing  population  may  find  it  more  advantageous  to 
trace  back  the  lines  along  which  food  finds  its  way  to 
her  shores,  and  make  their  homes  amid  the  fields  where 
it  is  produced,  than  to  remain  crowded  together  in  her 
island  homestead,  dear  as  it  justly  is  to  all  her  children. 
But  either  at  home,  or  in  the  lands  from  which  her  sup- 
ply of  bread  comes,  her  people  have  little  reason  to  ap- 
prehend scarcity  of  food,  or  much  enhancement  of  its 
price. 

§  50.  The  third  case  is  that  of  desirable  products 
which  from  the  nature  of  the  case  are  limited  in  amount^ 
and  can  in  no  manner  be  increased.  To  this  class  be- 
long paintings  and  other  valuable  productions  of  mas- 
ters who  are  no  longer  living.  The  price  of  such  works 
is  limited  only  by  the  desire  to  possess  them,  and  ability 
to  purchase  them.     As  long  as  the  love  of  high  art 


FLUCTUATIONS   OF   VALUE.  67 

continues  to  increase,  and  the  works  of  any  master  con- 
tinue to  rise,  or  do  not  decline  in  the  relative  estima- 
tion in  which  they  are  held;  and  the  wealth  of  the 
community,  or  of  the  highly  civilized  nations  of  the 
world  continues  to  increase,  the  works  of  such  a  mas- 
ter will  be  likely  to  rise  in  price  beyond  any  assignable 
limit.  The  love  of  the  beautiful  in  human  nature  is 
sufficiently  strong  to  insure  a  high  valuation  of  the 
works  of  genius. 

The  same  considerations  are  applicable  to  all  com- 
modities and  all  exchangeable  values,  the  supply  of 
which  is  limited  and  incapable  of  being  increased.  To 
this  class  belongs  the  land  on  which  a  great  city  is  built, 
embracing  a  considerable  area  around  it.  It  is  needed 
for  purposes  of  the  greatest  importance,  and  no  other 
land  can  be  substituted  for  it.  As  the  population  and 
wealth  of  the  city  increase,  its  desirableness  increases 
also,  and  men  of  wealth  in  increasing  numbers,  com- 
pete with  each  other  for  its  possession,  and  it  is  diffi- 
cult to  set  any  limit  to  its  increasing  value,  so  long  as 
the  growth  of  the  city  continues.  The  constantly 
advancing  price  of  land  in  all  countries  of  rapidly  grow- 
ing wealth  and  population  participates  more  or  less  of 
the  same  character.  It  performs  a  function  in  the 
economic  system  which  nothing  else  can  perform ;  the 
importance  of  that  function  is  growing  with  every  suc- 
cessive generation,  and  no  outlay  of  labor  or  capital 
can  render  any  other  land  capable  of  performing  that 
function.  Prices  must  therefore  be  steadily  advanced 
till  the  increase  of  wealth  and  population  is  by  some 
cause  arrested.  On  the  supposition  of  the  simultane- 
ous and  persistent  application  of  the  forces  of  civiliza- 
tion to  our  whole  planet,  the  whole  surface  of  the  earth 
must  ultimately  be  subjected  to  this  law.  Land  must 
every  where  advance  in  price  ua^gfcJi^jifluence  of 

'^'^  OP  THB^. 


68  ECONOMICS. 

increasing  wealth  and  population  till  its  entire  produc- 
tive power  has  been  brought  into  use,  and  the  ultimate 
limit  of  the  possible  increase  of  the  human  race  attained. 
The  time  however  at  which  such  a  result  would  be 
reached  is  so  remote  in  the  distant  future,  that  the  ap- 
prehension of  it  can  make  no  modification  of  our  pre- 
sent economic  system. 


CHAPTER   III. 

» 

Money. 


§  51.  In  no  stage  of  the  development  of  the  science 
of  Economics,  can  we  ever  be  far  removed  from  some 
great  law  of  human  nature.  This  holds  of  exchange  as 
of  every  other  branch  of  the  subject.  Brutes  use  no 
tools ^  man  does  nothing  without  tools.  No  brute  is  capa- 
ble of  such  a  comparison  of  the  desirableness  of  two 
things,  as  to  qualify  him  voluntarily  to  accept  of  one  of 
them  as  an  equivalent  for  the  other.  Man's  life  is  not 
only  filled  up  with  such  exchanges,  but,  true  to  his 
rational  nature,  he  has  invented  and  used  through  the 
ages  a  tool  by  which  such  exchanges  are  facilitated  and 
assisted.  That  tool  is  money.  By  means  of  the  tools 
which  we  employ  in  the  production  of  material  wealth, 
we  avail  ourselves  of  some  natural  force,  to  assist  our 
labor,  as  by  the  water  wheel  we  employ  for  this  purpose 
the  momentum  of  falling  water.  By  means  of  the  tool 
of  exchange,  we  make  use  of  the  desire  of  all  men  for 
certain  rare,  brilliant  and  beautiful  objects,  to  facilitate 
the  exchange  of  all  other  objects  of  desire  which  have 
value. 

§  52.   This  tool  is  not  however ^  like  the  steam  engine 


MONEY.  69 

or  the  electric  telegraphy  the  invention  of  any  single  mind. 
It  must  have  come  into  use  gradually  through  the  like 
experience  of  many  persons,  and  been  brought  to  its 
present  perfection  in  the  progress  of  many  ages.  AD 
exchanges  must  have  originally  been  exchanges  in 
kind, — mere  barter.  Such  exchanges  always  involve 
great  inconvenience.  He  who  has  anything  to  exchange 
has  gre.it  difficulty  in  finding  some  one  who  desires 
what  he  has  to  part  with,  and  will  give  him  for  it  what 
he  wants.  The  exchange  is  therefore  long  delayed,  and 
during  this  delay  that  which  he  wishes  to  exchange 
yields  no  profit,  and  much  time  is  wasted  in  trying  to 
make  the  exchange,  which  would  otherwise  have  been 
employed  in  production.  If  what  he  has  to  exchange 
is  of  considerable  value,  as  a  horse,  or  a  yoke  of  oxen, 
it  is  very  difficult  to  effect  such  a  division  of  it  as  to 
procure  many  small  articles  which  he  needs.  In  order 
to  accomplish  it,  he  is  forced  to  make  many  exchanges 
instead  of  one.  He  at  length  discovers,  in  the  course 
of  his  experience,  that  there  is  some  one  species  of 
wealth  which  nearly  every  one  desires,  and  at  all  times 
and  in  any  quantity  large  or  small.  It  immediately 
occurs  to  a  sagacious  man,  that  by  exchanging  what  he 
has  to  spare  for  what  he  finds  almost  every  one  is  in 
want  of,  he  can  with  that  object  of  general  desire  pro- 
cure without  difficulty  whatever  he  wants.  He  adopts 
that  method  of  exchange,  and  finds  great  advantage  in 
it.  Other  men  easily  make  the  same  discovery,  and 
resort  to  the  same  method  of  exchange.  This  renders 
the  object  of  general  desire  still  more  desirable.  Every 
one  will  be  eager  to  get  it,  because  he  can  easily  ex- 
change it  for  anything  which  he  happens  to  want. 
Thus  without  any  one's  invention,  without  any  formal 
agreement,  this  object  of  general  desire  has  become  an 
accepted  medium  of  exchange, — naoney.    It  may  be  any 


70  ECONOMICS. 

thing  which  happens  to  be  regarded  as  universally  de- 
sirable, in  the  particular  community  that  uses  it.  If 
that  community  is  so  isolated  that  it  has  no  exchanges 
with  the  rest  of  the  world,  it  will  be  a  satisfactory 
money,  as  long  as  it  continues  to  be  an  object  of  uni- 
versal desire. 

§  53.  It  can  only  however  perform  its  function  sat- 
isfactorily, so  long  as  that  community  continues  to  be  a 
7vorld  by  itself^  unless  it  is  also  regarded  as  wtiversally  de- 
sirable by  the  rest  of  the  world^  as  well  as  by  the  people  of 
that  particular  community.  It  would  not  in  the  least 
facilitate  outside  exchanges.  If  for  example  some  iso- 
lated people  had  so  great  a  fancy  for  certain  rare  sea 
shells  found  on  their  coast,  either  as  articles  of  ornament, 
or  because  they  believed  them  to  be  a  peculiarly  accept- 
able offering  to  make  to  their  gods,  that  everyone  always 
desired  to  procure  them,  and  was  willing  to  give  in  ex- 
change for  them  whatever  he  desired  to  part  with,  those 
shells  would  do  well  enough  for  money,  while  they  had 
no  intercourse  with  any  other  people ;  but  they  would 
procure  nothing  in  exchange  from  any  portion  of  the 
world  where  no  such  fancy  prevailed.  They  could  not 
even  be  money  to  that  people  themselves,  unless,  for 
some  such  reason  as  we  have  supposed,  they  were  ob- 
jects of  universal  desire.  No  agreement,  no  enactment 
even,  can  ever  fit  any  substance  to  become  a  universal 
medium  of  exchange, -unless  it  is  an  object  of  desire 
wherever  in  all  the  world  exchanges  are  to  be  carried 
on,  so  that  whoever  desires  to  procure  anything  from  us 
may  know  what  he  must  offer  in  exchange  for  it,  and  that 
whatever  we  may  wish  to  procure  from  abroad  we  may 
know  an  equivalent  by  which  we  may  be  sure  to  obtain  it. 

Definition,  Money  is  some  product  of  labor  which  in 
every  region  of  the  earth  to  which  exchanges  extend ^  is  de- 
sired  by  all  meUf  in  all  quantities ^  and  at  all  times. 


MONEY.  71 

Perhaps  it  may  be  thought  that  this  definition  is  too 
comprehensive.  There  may  be — there  are  some,  savage 
tribes  with  whom  occasional  visitors  from  the  civilized 
world  may  make  some  trifling  exchanges,  who  know 
nothing  of  the  value  of  the  money  which  we  use.  But 
no  people  can  gain  admittance  into  the  economic  brother- 
hood without  some  degree  of  civilization.  The  world  of 
our  science  is  everywhere  sufficiently  civilized  to  carry 
on  something  like  regular  trade.  In  so  far  as  any  por- 
tion of  the  human  race  is  in  the  savage  state,  it  can  have 
no  place  in  social  science. 

In  connection  with  this  definition  it  is  proper  to  refer 
again  to  the  logical  division  of  capital  which  has  already 
been  given.  Fixed  capital  was  sub-divided  into  three 
species — the  Real,  the  Mechanical  and  the  Mercantile. 
Money  is  the  mercantile  fixed  capital,  the  labor-saving  ma- 
chine  of  exchange.  Ft  just  as  truly  assists  the  labor  which 
is  employed  in  exchange,  as  machinery  assists  the  labor 
of  the  manufacturer.  The  negotiation  of  exchanges  is 
just  as  truly  labor  as  the  spinning  of  cotton,  and  just  as 
truly  needs  to  be  assisted  by  invention.  Professor  Perry 
says  all  labor  consists  in  "  moving  things."  This  is  quite 
too  narrow  a  view  of  labor.  A  great  deal  of  labor  is 
performed  without  moving  things  at  all.  This  is  true  of 
much  of  the  labor  of  exchange. 

§  54.  In  the  two  metals  gold  and  silver  we  have  sub- 
stances which  possess  to  a  degree  quite  wonderful  the 
essential  quality  of  money — universal  desirableness. 
They  sustain  such  a  relation  to  human  taste  and  use, 
that  they  have  been  universally  desired  all  along  in  the 
world's  history,  from  the  earliest  antiquity  of  which  we 
have  any  authentic  record.  Nor  is  there  any  reason  to 
suppose  that  in  the  future,  however  distant,  they  are  to 
be  supplanted  from  that  place  in  human  regard  which 
they  have  always  occupied.    The  taste  of  all  men  for  the 


73  ECONOMICS. 

brilliant,  the  beautiful  and  the  permanent  has  made  gold 
and  silver  to  be  money  for  many  ages  and  over  a  large 
portion  of  the  world.  They  are  the  ornaments  of  kings, 
of  their  palaces,  their  persons,  their  crowns  and  their 
thrones,  and  their  carriages  of  state,  of  the  temples  and 
of  the  altars  of  divinity,  of  the  wealthy  and  the  great 
and  of  female  beauty  and  loveliness.  It  is  this  relation 
to  human  taste,  that  has  so  long  made  them  the  circu- 
lating medium  of  the  civilized  world,  and  will  probably 
fit  them  to  perform  that  function  in  the  distant  future. 

They  have  also  other  qualities  which  combine  with 
their  brilliancy  and  beauty  to  increase  their  fitness  for 
that  function.  Their  scarcity  and  the  great  amount  of 
human  labor  necessary  to  procure  them  and  introduce  them 
into  the  markets  of  the  world,  are  such  as  to  render  a 
small  quantity  of  either  of  them  of  great  value.  Nothing, 
it  has  been  shown,  will  continue  to  be  produced,  unless 
its  value  for  long  periods  equals  its  cost.  As  the  cost  of 
these  metals  is  high,  their  value  must  be  high  also.  A 
small  amount  of  gold  and  silver  will  procure  by  exchange 
a  large  amount  of  other  objects  of  desire.  One  can 
therefore,  by  converting  what  he  has  for  exchange  into 
gold  and  silver,  compress  great  purchasing  power  into 
very  small  bulk  and  weight.  This  very  greatly  increases 
the  usefulness  of  these  substances  as  money. 

It  is  however  possible  that  a  substance  may  be  of  too 
high  value  to  be  used  in  exchanging  articles  whose  price 
is  small.  This  is  true  of  gold.  When  so  minutely  di- 
vided as  to  represent  very  small  values,  the  pieces  be- 
come so  small  as  to  be  easily  lost,  and  incapable  of  being 
counted  or  handled  with  convenience.  It  is  therefore  a 
great  advantage  that  we  have  another  metal  fit  in  other 
respects  to  be  used  for  money,  which  is  much  less  valu- 
able, and  therefore  much  better  suited  to  small  exchanges. 
Gold  coins  of  less  value  than  one  dollar  would  be  very 


MONEY.  73 

undesirable,  and  are  never  made.  The  sub-divisions  of 
ttie  dollar  are  always  coined  from  silver.  Even  silver  is 
too  costly  for  the  minutest  divisions  which  are  found  con- 
venient. For  these  copper  is  therefore  employed  in  its 
stead. 

Capability  of  minute  division  without  loss  of  value  is 
another  great  advantage  which  gold  and  silver  possess, 
without  which  they  would  be  ill-adapted  to  some  of  the 
uses  of  money.  Diamonds,  like  gold,  have  great  value 
in  very  small  compass,  but  are  incapable  of  division 
without  loss  of  value.  A  large  diamond  is  greatly  more 
valuable  than  an  equal  weight  of  small  ones.  They 
are  therefore  unfit  to  be  divided  into  pieces  sustaining 
definite  relations  of  value  to  each  other,  nor  can  they 
receive  any  impress  by  which  their  value  can  be  indi- 
cated to  the  eye. 

§  55.  Another  quality  is  exceedingly  important  in 
that  which  is  to  perform  the  functions  of  money.  Its 
cost^  and  therefore  its  value  must  be  as  invariable  as  pos- 
sible. This  introduces  to  our  consideration  another  func- 
tion of  money  not  hitherto  mentioned,  which  is  of  the 
greatest  importance.  We  have  already  shown  that  any 
substance  universally  desired  originally  becomes  money 
only  because  the  convenience  of  exchange  requires  it. 
But  any  substance  by  becoming  the  universal  medium  of 
exchange,  also  becomes  of  necessity  the  universal  measure 
of  value.  If  there  were  no  medium  of  exchange,  there 
could  be  no  generally  recognized  standard  by  which 
values  could  be  estimated.  No  general  estimate  could 
be  formed  of  the  wealth  of  a  man,  or  of  a  community. 
You  could  only  give  a  catalogue  of  existing  possessions, 
for  example,  so  many  horses,  so  many  oxen,  so  many 
sheep  and  so  on.  There  could  be  no  accurate  compari- 
son of  the  value  of  the  things  exchanged  for  each  other, 
and  only  a  very  rude  approximation  to  true  equivalency. 
4 


74  ECONOMICS. 

But  as  soon  as  there  is  any  accepted  medium  of  ex- 
change, it  of  necessity  becomes  also  a  standard  of  value. 
All  values  are  estimated  by  comparison  with  the  circulat- 
ing medium,  and  can  therefore  be  directly  compared  wivh 
each  other.  A  horse  is  not  worth  so  many  oxen,  or  so 
many  sheep,  but  so  many  dollars.  It  thus  becomes  easy 
to  estimate  the  entire  amount  of  any  one's  wealth  or  of 
the  wealth  of  a  community  or  a  nation. 

This  function  of  money  becomes  very  important  in 
the  case  of  time  contracts.  If  one  contracts  to  pay  one 
hundred  bushels  of  wheat  in  twelve  months  the  next 
harvest  may  be  a  very  bad  one,  and  he  may  therefore  be 
under  the  necessity  of  paying  one  hundred  bushels  when 
a  bushel  is  worth  twice  as  much  as  when  the  contract 
was  made.  This  makes  the  transaction  inequitable,  and 
such  a  liability  will  make  men  averse  to  all  time  con- 
tracts, and  throw  a  grave  impediment  in  the  way  of 
the  working  of  the  natural  law  of  exchange.  The  sub- 
ject of  credit  will  be  considered  in  another  place :  it  is 
sufficient  to  say  of  it  in  this  place,  that  the  use  of  credit 
in  exchanges  is  an  outgrowth  of  our  social  nature,  and 
if  our  instrument  of  exchange  is  not  suited  to  it,  great 
inconvenience  must  follow.  A  medium  of  exchange  will 
always  be  a  standard  of  value,  and  if  it  is  liable  to  great 
fluctuations  of  its  own  value,  it  will  be  a  barrier  nearly 
insuperable  to  all  negotiations  of  exchanges  which  in- 
volve the  element  of  time. 

The  precious  metals  are  eminently  fit  to  perform  this 
function  of  money.  Of  course  their  value  is  not  strictly! 
invariable.  The  discovery  of  new  and  more  productive 
mines  than  were  before  known  sometimes  sensibly  di 
minishes  the  cost  of  the  precious  metals  and  therefore 
diminishes  their  value  as  compared  with  all  other  object? 
of  desire.  But  history  clearly  shows  that  this  variatior 
has  been  less  than  in  the  case  of  any  other  product  oi 


MONEY.  75 

human  labor.  There  have  been,  so  far  as  history  in- 
forms us,  but  two  instances  in  many  centuries,  in  which 
there  has  been  a  change  in  the  value  of  these  metals 
which  was  appreciable,  without  extending  the  compari- 
son over  long  periods  of  time.  Those  two  instances 
were  of  course  the  discovery  of  America,  and  the  open- 
ing of  the  mineral  resources  of  California,  Australia  and 
the  Rocky  Mountains.  The  effect  of  this  last  great 
monetary  revolution  is  not  even  now  fully  developed. 
But  nothing  has  yet  occurred  to  weaken  the  assertion, 
that  the  value  of  the  precious  metals  is  less  fluctuating 
than  the  value  of  any  other  product  of  human  labor. 
Just  so  far  as  that  proposition  remains  true,  they  are  of 
course  preeminently  fitted  to  be  the  standard  of  value 
for  the  commercial  world. 

§  56.  We  have  here  another  illustration  of  the  cosmo- 
politan character  of  our  science,  and  of  the  importance  of 
always  keeping  it  in  mind.  It  is  exceedingly  desirable 
that  whatever  we  use  as  the  standard  of  value  and  the 
medium  of  exchange,  in  one  country,  should  be  so  used 
in  all  other  countries  to  the  extreme  limits  of  the  eco- 
nomic world.  If  the  same  substance  is  used  for  these 
purposes  everywhere,  that  circumstance  alone  has  a  very 
important  influence  in  preventing  fluctuation  of  value. 
If  our  country  only  had  used  the  precious  metals  for 
money,  and  all  the  rest  of  the  world  had  used  a  different 
medium  of  exchange,  the  gold  which  has  been  obtained 
from  our  recently  discovered  mines  would  have  mostly 
remained  at  home.  Its  effect  on  the  standard  of  value 
would  have  then  depended  on  the  ratio  existing  between 
it  and  the  amount  of  gold  which  would  have  been  in  cir- 
culation among  us,  had  these  mines  never  been  discov- 
ered. The  effect  must  have  been  to  produce  a  depres- 
sion in  the  value  of  gold  which  must  have  greatly  dis- 
turbed the  prices  of  all  other  commodities.     But  in  the 


76  ECONOMICS. 

present  order  of  things,  gold  being  the  money,  not  of  a 
single  country  only,  but  of  the  world,  the  effect  produced 
on  the  standard  of  value  is  regulated  by  the  ratio  of  the 
recently  produced  gold  to  the  whole  amount  previously 
existing  in  the  world.  Great  therefore  as  the  amount 
of  recently  produced  gold  is,  the  fluctuation  of  value  oc- 
casioned by  it,  is  comparatively  small.  A  single  heavy 
rain  will  raise  the  level  of  a  mill-pond  or  of  a  small  in- 
land lake,  so  as  to  produce  disaster,  but  it  will  have  no 
appreciable  effect  on  the  ocean  level.  Gold  and  silver, 
considered  as  a  standard  of  value,  are  an  ocean  flowing 
around  the  whole  economic  world,  and  very  large  addi- 
tions at  two  or  three  points  are  immediately  distributed 
to  every  part,  like  water  which  is  poured  into  the  ocean 
from  a  single  river,  can  have  no  appreciable  effect 
on  its  level. 

§  57.  It  is  hardly  possible  to  avoid  being  impressed 
with  the  thought  of  a  designing  mind^  as  we  contemplate 
the  relation  of  these  two  metals  to  the  economy  of  the 
human  family.  Among  all  the  materials  of  which  the 
solid  earth  is  composed  two  substances  are  found,  each 
of  which  is  so  related  to  human  taste  as  to  render  it  an 
object  of  universal  desire  among  all  civilized  nations, 
and  thus  fit  to  be  everywhere  without  concert  or  any 
form  of  agreement,  a  medium  of  exchange  and  a  standard 
of  value.  Both  these  substances  exist  in  quantities  so 
small  and  require  so  much  labor  to  bring  them  into  the 
markets  of  the  world,  as  to  insure  their  great  value,  and 
in  a  great  degree  to  protect  them  from  liability  to  fluctu- 
ation. They  stand  also  in  such  relations  of  value  to 
each  other,  as  to  fit  one  of  them  for  large  exchanges  and 
the  other  for  small.  They  are  so  easily  transported,  that 
by  means  of  them  the  largest  values  may  be  carried  to 
any  requisite  distance  almost  without  expense ;  and  thus 
a  deficiency  of  them  in  any  one  part  of  the  world  may  be 


MONEY.  77 

rery  quickly  supplied  from  parts  where  they  are  in  ex- 
cess. They  are  thus  fitted  and  seem  intended  to  unite 
the  whole  human  family  into  one  great  economic  world, 
around  which  they  circulate  as  an  ocean  of  liquid  value, 
whose  sea  level  is  almost  as  invariable  as  that  of  the 
ocean  of  waters,  and  whose  fluctuations  scarcely  exceed 
those  caused  by  oceanic  tides. 

This  comparative  exemption  from  fluctuation  is  very 
greatly  increased  by  the  facilities  of  communication  which 
recent  invention  has  provided.  Taken  in  connection 
with  the  small  bulk  of  the  precious  metals  in  proportion 
to  their  value,  these  modern  inventions  give  to  the  money 
of  the  world  almost  the  fluidity  of  water  itself.  If  wheat 
or  iron  or  any  other  heavy  or  bulky  substance  were  the 
medium  of  exchange,  nothing  of  the  kind  could  happen. 
All  men  do  indeed  need  and  desire  wheat.  But  its  bulk 
and  weight  are  such,  that  to  transport  it  from  the  point  of 
abundance  to  the  point  of  deficiency  would  soon  consume 
half  its  value,  or  even  in  some  cases  its  whole  value.  If 
therefore  it  were  scarce  in  one  region  of  the  earth  it  would 
there  rise  in  value  without  the  possibility  of  supplying 
the  deficiency,  and  bringing  down  the  price  to  the  com- 
mon standard,  by  transporting  it  from  regions  of  abund- 
ance. In  that  case  there  could  be  no  ocean  of  value  of 
a  uniform  level.  One  may,  we  think,  in  this  view  of 
things  easily  become  satisfied  that  all  theories  of  money 
must  be  fallacious  and  deceptive,  which  leave  out  of  the 
account  this  oceanic  character  of  the  world's  standard 
of  value.  Such  theories  cannot  be  expressions  of  the 
natural  laws  of  exchange. 


78  ECONOMICS. 


CHAPTER   IV. 


The  Relation  of  the  Governme?it  to  the  Medium  of 

Exchange, 

§  58.  In  the  present  condition  of  the  public  mind,  the 
subject  indicated  by  the  heading  of  this  chapter  is  one 
of  great  delicacy,  and  yet  of  great  importance. '  It  is 
therefore  necessary  that  it  should  be  discussed  with  can- 
dor and  thoroughness. 

The  fact  that  each  piece  of  money  as  it  is  ordinarily 
used  bears  a  government  stamp,  most  commonly  a  stamp 
of  the  government  under  which  it  chiefly  circulates,  has 
been  the  occasion  of  much  confusion  of  thought,  and 
many  erroneous  conceptions  of  the  subject.  We  hear  in 
these  days  utterance  given  to  many  such  crude  notions, 
from  men  of  respectability  and  intelligence,  and  even 
from  some  who  aspire  to  be  the  rulers  and  legislators  of 
the  nation ;  as  for  example,  that  money  is  the  creature 
of  the  government,  that  it  circulates  as  money  because 
the  government  has  made  it  money  by  enactment,  and 
that  the  government  can  make  anything  to  be  money 
which  it  chooses.  At  the  present  time  our  country  is  the 
hotbed  of  false  and  chimerical  ideas  on  this  whole  sub- 
ject. The  reason  why  it  is  so,  is  found  in  the  fact,  that 
our  whole  history  since  the  American  Revolution  has 
been  a  series  of  unsuccessful  experiments  on  the  cur- 
rency, and  the  fact  that  some  fifteen  years  ago  an  act  of 
Congress  was  passed  in  direct  violation  of  the  first  prin- 
ciples on  which  the  monetary  system  of  the  world  is 
founded,  and  that  that  law  remains  still  in  force.  Our 
history  in  relation  to  this  subject  has  certainly  been  un- 
fortunate, and  in  that  better  time  coming  when  the  true 
principles  of  the  subject  shall  be  understood  and  reduced 


RELATION   OF    GOVERNMENT   TO    MEDIUM.  79 

to  practice^  will  be  reviewed  with  wonder  and  sorrow. 
The  whole  financial  system  of  the  nation  is  unsettled 
and  in  confusion,  and  men's  minds  are  filled  with 
strangely  wild  and  chimerical  theories.  Of  the  finan- 
cial  arrangements  which  originated  during  the  war  of  the 
rebellion,  under  the  pressure  of  military  necessity,  we 
shall  speak  in  another  place.  But  the  nature  of  that 
power  which  governments  exercise  over  money  must  be 
explained  here.  We  have  already  shown  that  money 
originates,  and  the  substance  or  substances  to  be  used 
for  money  are  selected  in  accordance  with  natural  laws, 
without  any  intervention  of  the  government  whatever. 
Coinage  is  a  mere  arrangement  for  the  common  con- 
venience. To  determine  the  precise  quantity  of  gold  or 
silver  in  any  given  mass  is  difficult  and  troublesome,  and 
considering  the  ordinary  crude  condition  in  which  these 
metals  are  for  the  most  part  found,  more  or  less  alloyed 
with  the  baser  metals,  it  would  be  in  the  ordinary  trans- 
actions of  business,  impossible.  The  governments  of 
the  civilized  world,  in  order  to  remove  this  inconvenience, 
undertake  to  reduce  the  precious  metals  to  a  recognized 
standard  of  purity,  to  divide  them  into  pieces  bearing 
such  relations  to  one  another  as  convenience  is  found  to 
require,  and  to  place  on  each  piece  a  stamp  which  shall 
certify,  on  the  faith  of  the  government,  the  quantity  of 
the  precious  metal  contained  in  it.  Coinage  is  in  prin- 
ciple precisely  like  the  arrangements  of  the  government 
for  furnishing  invariable  standards  of  length,  weight  and 
capacity.  All  these  provisions  are  alike  matters  of  mere 
convenience,  and  give  the  government  no  right  of  control 
or  dictation  in  the  matter,  beyond  what  the  common  con- 
venience requires.  If  one  has  had  the  accuracy  of  his 
half  bushel  certified,  by  having  a  government  stamp  put 
on  it,  that  does  not  prove  that  the  government  owns  the 
half  bushel,  instead  of  the  nominal  owner  of  it,  but  onlv 


8o  ECONOMICS. 

that  the  owner  has  made  it  more  trustworthy  for  his  owi\ 
ase  by  the  government  certificate.  The  coining  of  money 
has  the  same  significancy — no  more — no  less. 

That  this  is  a  true  account  of  the  matter,  is  very  ap- 
parent. During  a  considerable  portion  of  our  history  as 
a  nation,  the  specie  in  circulation  was  of  Spanish  and 
not  of  our  own  coinage.  It  consisted  of  the  Spanish 
dollar  and  its  half,  quarter,  eighth  and  sixteenth,  and 
bore  the  image,  not  of  liberty,  but  of  the  kings  of  Spain. 
The  people  had  confidence- in  the  soundness  and  honesty 
of  that  coinage,  and  were  willing  to  accept  it,  instead  of 
putting  our  government  to  the  expense  of  re-coining  it. 
We  happened  to  have  it,  because  at  that  time  we  pro- 
duced little  either  of  gold  or  silver,  and  received  our 
supplies  of  them  from  Mexican  and  South  American 
mines,  then  under  the  dominion  of  Spain. 

If  our  government  were  to  attempt  to  manufacture 
money  out  of  baser  metal,  such  money  would  be  just 
as  certainly  and  indignantly  rejected  by  the  creditor,  if 
offered  in  payment  of  his  debt,  as  it  would  be  if  it  came 
from  any  irresponsible  counterfeiter.  Is  it  asked  then — 
has  not  the  government  a  right  to  enact  what  shall  be 
legal  tender  ?  and  may  it  not  make  one  thing  legal  tender 
as  well  as  another  ? 

§  59.  The  right  of  the  government  to  declare  what  shall 
he  legal  tender  i?t  the  payment  of  debts  sustains  no  relation 
whatever  to  the  nature  and  functions  of  money.  It  has 
already  been  shown,  that  it  is  a  necessity  of  all  men,  that 
the  civil  government  under  which  they  live  should  pro- 
tect them  in  their  property  rights.  In  the  performance 
of  this  duty,  the  government  must  necessarily  undertake 
to  compel  men  to  pay  their  fairly  contracted  debts.  In 
order  to  do  this,  it  must  prescribe  some  plain  and  equit- 
able rule,  by  which  it  shall  be  determined  what  consti- 
tutes payment.     If  for  example  A.  has  promised  to  pay 


RELATION    OF    GOVERNMENT   TO    MEDIUM.  S\ 

B.  a  certain  sum,  and  it  is  not  specified  in  the  obligation 
in  what  it  is  to  be  paid,  B.  may  perhaps  insist  on  receiv- 
ing it  in  some  unusual  product,  which  it  is  very  inconven- 
ient for  A.  to  furnish.  The  legal  tender  law,  as  it  existed 
before  the  war,  provided,  that  in  all  such  cases  the  con- 
tract shall  be  interpreted  to  require  payment  in  the  or- 
dinary and  recognized  medium  of  exchange,  gold  and 
silver  coin  of  the  United  States.  The  full  extent  of  the 
power  of  the  government  to  prescribe  what  shall  be  legal 
tender  in  the  payment  of  debts,  is  its  power  to  prescribe 
an  equitable  rule  by  which  such  contracts  shall  be  inter- 
preted, according  to  the  clearly  presumable  intention  of 
the  parties.  Till  the  great  financial  revolution  growing 
out  of  the  late  war,  no  one  ever  imagined  that  the  right 
to  prescribe  a  legal  tender  had  any  other  significancy  or 
extent  than  this.  Whence  then  the  notion  that  under 
this  right  there  is  included  a  power  to  compel  the  credi- 
tor, whenever  the  government  shall  so  enact,  to  receive 
paper  or  tin  dollars  instead  of  gold  in  payment  of  all 
debts  ?  Such  an  idea  is  utterly  groundless,  and  its  pre- 
valence among  a  people  every  man  of  whom  casts  his 
vote  for  the  rulers  and  legislators  of  the  nation,  is  danger- 
ous in  the  extreme. 

§  60.  JVas  then  the  Act  of  Congress  making  the  Unitca 
States  Treasury  Notes ^  known  as  Greenbacks^  legal  tender 
for  all  debts^  an  act  of  injustice  and  tyranny  ?  To  a  ques- 
tion so  directly  ethical  in  its  nature  as  this,  it  is  not  our 
business  to  respond.  But  it  does  come  within  our  sphere 
to  show  as  clearly  as  possible  what  was  the  real  effect  of 
that  law  on  our  economic  system.  When  that  law  was  en- 
acted the  value  of  a  greenback  dollar  differed  very  little 
from  that  of  the  gold  dollar,  and  it  was  probably  hoped, 
and  by  many  believed,  that  no  great  difference  would 
afterwards  arise.  It  was  not  therefore  supposed  that  any 
great  inconvenience  was  to  be  experienced  from  the 
4* 


82  ECONOMICS. 

working  of  the  law,  and  little  was  therefore  thought  of 
the  question  of  its  justice  or  injustice.  But  within  a  few 
months  after  its  passage  it  required  two  hundred  and 
eighty-five  dollars  in  greenbacks  to  buy  one  hundred  in 
gold;  that  is  a  greenback  dollar  was  worth  only  thirty- 
six  cents  in  gold.  Its  power  to  procure  by  exchange  all 
other  objects  of  desire  was  depreciated  in  the  same  ratio. 
The  practical  working  of  the  law  was  a  reduction  by  Act 
of  Congress  of  the  value  of  all  stated  incomes  in  the 
ratio  of  one  hundred  dollars  to  thirty-six  dollars.  A 
provision  for  the  support  of  a  widowed  mother  and  her 
children  was  reduced  from  a  competency  of  ten  thousand 
dollars,  with  an  income  of  one  thousand  dollars,  to  the 
pittance  of  thirty-six  hundred  dollars,  with  an  income  ot 
three  hundred  and  sixty  dollars.  On  the  other  hand 
the  debtor  that  owed  one  thousand  dollars  in  gold,  could 
pay  it  with  one  thousand  dollars  in  greenbacks  worth 
only  three  hundred  and  sixty  dollars. 

What  motive,  it  may  be  asked,  had  the  government 
for  enacting  such  a  law  ?  This  is  a  very  pertinent  ques- 
tion and  shall  be  fairly  answered.  It  certainly  was  not 
because  any  one  supposed  or  pretended,  that  in  the  ordi- 
nary conditions  of  national  existence,  any  government 
had  a  right  to  interfere  in  this  manner  with  the  relations 
of  a  debtor  to  his  creditor.  It  was  well-known  to  be  a 
flagrant  violation  of  the  fundamental  law  of  ownership, 
and  of  a  sound  economy.  It  was  justified  only  in  con- 
sideration of  the  stern  necessities  to  which  the  war  had 
reduced  the  nation.  Money  could  not  be  raised  either 
by  taxation  or  regular  loan  with  sufficient  rapidity  to 
meet  the  expenses  of  the  war.  The  government  was 
compelled  by  inevitable  necessity  to  put  off  its  creditors 
for  the  present  with  promises  to  pay,  which  at  the  time 
she  was  utterly  unable  to  fulfill.  It  was  evidently  very 
important  to  employ  every  practicable  means  to  prevent 


RELATION    OF   GOVERNMENT   TO    MEDIUM.  83 

the  depreciation  of  these  promises.  It  was  therefore 
deemed  advisable  to  make  them  receivable  in  payment 
of  debts  by  all  creditors  as  well  as  by  the  creditors  of 
the  government.  By  this  measure  it  was  hoped  that  their 
depreciation  would  be  wholly  prevented,  or  at  least 
greatly  retarded.  Hence  the  legal  tender  clause  in  the 
law  authorizing  the  issue  of  treasury  notes. 

§  61.  It  is  not  within  our  province  to  express  an 
opinion  on  the  very  grave  question,  whether  so  high- 
handed and  anomalous  an  act  could  be  justified  even  in 
circumstances  so  urgent.  It  is  enough  for  us  to  say, 
that  our  science  knows  nothing  of  any  suck  control  of  the 
government  over  the  world's  medium  of  exchange.  The 
admission  of  the  principle  would  be  utterly  destructive 
of  the  property  rights  of  the  creditor  in  his  relations  to 
the  debtor.  What  the  creditor  might  hope  to  receive 
would  depend,  not  on  what  the  debtor  had  promised,  but 
on  what  the  arbitrary  will  of  the  government  might  enact. 
The  law  of  ownership  can  recognize  no  loans  either  to 
individuals  or  governments,  except  by  the  voluntary  con- 
sent of  the  lender.  For  example  A.  owed  B.  one  thou- 
sand dollars  payable  in  gold;  the  government  owed  A. 
one  thousand  dollars  expressed  in  a  note  of  the  Treasury 
of  the  United  States.  It  required  B.  to  accept  its 
promise  to  pay  one  thousand  dollars  without  interest, 
at  that  uncertain  future  period  when  it  should  be  pre- 
pared to  redeem  its  promise,  as  payment  in  full  of  A's 
debt  of  one  thousand  dollars  in  gold  bearing  interest. 
It  was  a  requirement  that  B.  should  loan  the  government 
one  thousand  dollars  in  gold  without  interest,  and  wait 
till  the  government  was  prepared  to  pay  the  debt.  It 
was  a  direct  violation  of  the  law  of  ownership.  The 
government  took  the  property  of  the  owner  without  con- 
sent either  granted  or  even  asked. 

It  seems  to  be  a  very  popular  idea  in  the  discussions 


84  ECONOMICS. 

of  the  present,  that  the  government  ought  indeed  as 
soon  as  practicable  to  redeem  greenbacks  in  gold  when- 
ever presented,  but  that  they  should  by  no  means  be 
withdrawn  from  circulation.  This  is  simply  a  proposi- 
tion to  perpetuate  without  any  pretense  of  necessity,  this 
violation  of  a  fundamental  law  which  was  originally 
resorted  to  under  a  plea  of  a  necessity  involving  the 
very  life  of  the  nation.  A  government  never  can  make 
its  promises  to  pay  a  legal  tender  in  the  payment  of 
private  debts,  without  violating  the  fundamental  law  of 
all  exchange,  the  free  consent  of  both  parties.  It  is  of 
no  avail  to  say  that  when  the  government  redeems  green- 
backs with  specie  they  will  be  at  par  with  gold  and  sil- 
ver. That  may  be  true  so  long  as  the  credit  of  the  gov- 
ernment is  unimpaired.  But  if  national  disaster  again 
comes,  and  a  severe  strain  is  brought  upon  the  credit  of 
the  government,  greenbacks  will  again  be  depreciated, 
and  the  injustice  which  the  creditor  has  suffered  in  former 
years  will  be  again  renewed.  It  is  no  function  of  govern- 
ment to  intrude  its  promises  upon  the  creditor  in  pay- 
ment of  debts.  It  is  not  protecting  the  property  rights 
of  the  citizen,  but  divesting  him  of  his  property  without 
his  consent.  The  practice  of  issuing  treasury  notes 
made  legal  tender  may  plead  as  a  precedent  the  fact  that 
the  notes  of  the  Bank  of  England  are  legal  tender  in  the 
payment  of  debts.  The  example  of  England  herself  can- 
not justify  the  violation  of  a  fundamental  law  of  ex- 
change. That  provision  in  the  charter  of  the  Bank  of 
England  may  work  no  individual  wrong  in  times  of  na- 
tional prosperity  like  the  present,  but  calamity  may  yet 
again  come  upon  England,  and  then  the  consequences 
of  that  law  may  be  very  disastrous.  If  at  present  it  is 
harmless,  it  is  also  useless.  Why  not  then  abolish  it, 
and  let  the  future  legislate*  for  itself? 

§  62.  One  thing  would  seem  too  evident  to  require 


RELATION    OF   GOVERNMENT  TO   MEDIUM.  85 

any  confirmation  by  argument.  It  is  that  no  obligation 
resting  on  our  governmetit  can  be  more  sacred^  than  the  duty 
of  repaying  such  a  forced  loan  at  the  earliest  possible  day. 
The  whole  amount  of  greenbacks  in  circulation  is  a 
forced  loan,  and  if  our  government  means  to  earn  the 
reputation  of  being  the  protector  of  the  property  of  the 
citizen,  instead  of  openly  and  flagrantly  violating  it,  too 
much  haste  cannot  be  made  in  redeeming  the  promise 
of  the  government  which  is  expressed  on  the  face  of  every 
greenback.  It  is  no  wonder  that  strange  theories  of 
money  and  finance  are  rife,  when  the  government,  dur- 
ing the  twelve  years  which  have  elapsed  since  the  war 
was  ended,  has  scarcely  taken  a  step  in  the  direction  of 
fulfilling  these  promises  j  while  she  is  buying  up  her 
bonded  debt  at  what  it  is  worth  in  the  market,  by  hun- 
dreds of  millions,  and  that  on  the  plea  that  it  is  desira- 
ble to  diminish  the  amount  of  interest  to  be  paid,  and 
this  forced  loan  is  bearing  no  interest.  An  honest  man 
is  tempted  to  reply  with  some  sharpness  to  such  a  plea, 
"  it  ought  to  be  bearing  interest.  One  would  think  it 
had  been  held  without  interest  quite  long  enough."  But 
with  the  morality  of  the  question  we  are  not  now  con- 
cerned. It  is  to  be  hoped  that  so  strange  an  anomaly 
may  soon  be  removed  from  our  statute  book,  and  that  a 
precedent  so  full  of  danger  may  be  eliminated  from  our 
legislation. 

§  67^.  It  remains  to  point  out  the  relation  of  this 
anomaly  to  the  economic  system.  It  afibrds  a  striking 
illustration  of  the  phenomena  which  always  attend  a 
depreciated  currency.  By  a  depreciated  currency  is 
meant  a  national  medium  of  exchange,  which  is  in  value 
below  the  standard  of  the  rest  of  the  world.  The  efiect 
of  the  Legal  Tender  Act  was,  to  give  the  people  of  the 
United  States  such  a  currency.  All  debts  were  payable 
in  greenbacks.     Of  course  as  soon  as  greenbacks  began 


86  ECONOMICS. 

to  be  inferior  in  value  to  gold,  all  debts  were  paid  in 
them.  It  being  at  the  option  of  the  debtor  to  pay  in  which 
ever  he  pleased,  he  always  chose  to  pay  in  the  less  valu- 
able. Gold  therefore  ceased  to  circulate  as  money,  and 
greenbacks  became  the  sole  medium  of  exchange  and 
standard  of  value.  They  were  always  at  par  and  gold 
at  a  premium,  and  all  other  species  of  property  have  ad- 
vanced in  price  in  the  same  ratio. 

The  natural  consequences  of  a  depreciated  currency 
have  been  conspicuously  exhibited.  We  have  had  most 
disastrous  and  seemingly  capricious  fluctuations  of  our 
standard  of  value.  We  do  not  purpose  to  give  the  sad 
history  of  the  New  York  gold  room  for  the  last  fifteen 
years.  It  is  melancholy  enough,  and  by  no  means  cred- 
itable to  our  civilization.  It  is  sufficient  to  say,  that 
again  and  again  fluctuations  have  occurred  within  a  few 
days,  sometimes  even  in  a  single  day,  of  sufficient  magni- 
tude to  reduce  thousands  from  princely  wealth  to  bank- 
ruptcy, and  to  raise  other  thousands  from  comparative 
poverty  to  great  opulence.  It  is  important  to  make  the 
causes  of  these  fluctuations  clearly  apparent.  It  has 
already  been  shown,  that  the  stability  of  the  medium  of 
exchange  is  greatly  promoted  by  its  being  the  same 
throughout  the  world.  The  currency  of  the  world  thus 
becomes  an  ocean,  the  level  of  which  cannot  be  raised 
in  any  part  without  raising  the  whole  simultaneously. 
While  therefore  tbi  currency  of  any  country  is  the  same 
as  that  of  all  the  '■est  of  the  world,  sudden  fluctuation  is 
impossible.  But  our  medium  of  exchange  has  no  con- 
nection with  that  of  the  rest  of  the  world,  and  is  there- 
fore liable  to  rise  and  fall  with  any  sudden  and  tempo- 
rary impulse  originating  among  ourselves.  Increased  or 
diminished  confidence  in  the  government,  the  success  of 
one  political  party  or  another,  a  bad  harvest,  or  any  one 


RELATION    OF   GOVERNMENT   TO    MEDIUM.  8; 

of  a  multitude  of  other  causes  may  any  day  occasion  dis- 
astrous fluctuations. 

As  gold  and  silver  were  no  longer  money  we  had  lit- 
tle U52  for  them  in  any  of  the  ordinary  transactions  of 
trade.  The  government  had  large  payments  of  interest 
to  make,  and  large  collections  of  duties  to  be  received, 
in. gold.  It  had  therefore  constantly  on  hand  a  large 
amount  of  coin.  But  with  that  exception  the  precious 
metals  were  only  kept  on  hand  as  merchandise,  and  the 
amount  so  kept  was  never  very  large.  Merchants  must 
however  still  pay  duties  and  foreign  balances  in  gold, 
and  considerable  dealings  in  gold  were  therefore  inevi- 
table. In  these  circumstances  it  was  not  impossible  for 
combinations  of  speculators  to  obtain  control  of  nearly 
the  whole  amount  of  gold  in  the  market,  and  dispose  of  it 
only  on  their  own  terms.  Panics  of  the  most  fearful  char- 
acter have  been  thus  created,  by  which  the  whole  nation 
was  distressed,  and  thousands  were  ruined. 

§  64.  Another  and  most  important  cause  of  fluctua- 
tion remains  to  be  explained.  No  principle  is  better 
established,  than  that  whenever  any  object  of  desire  is 
thrown  upon  the  market  in  greater  quantities  than  the 
needs  of  the  people,  or  their  ability  to  purchase  requires, 
the  fact  will  be  indicated  by  a  fail  in  its  price,  and  that 
reduction  of  price  will  go  on  as  long  as  the  excessive  sup- 
ply continues  to  be  increased.  Such  fluctuations  of  price 
are  in  a  normal  condition  of  things  certain  to  be  arrested 
by  the  fact  that  the  labor  and  capital  employed  in  pro- 
ducing that  which  is  in  excess  cease  to  receive  satisfac- 
tory remuneration,  and  are  withdrawn  to  some  invest- 
ment in  which  they  are  more  needed.  In  a  sound  con- 
dition of  exchanges,  money  is  as  much  subject  to  this 
law  as  any  other  commodity.  If  for  any  cause  it  is  ex- 
cessively abundant,  it  will  no  longer  be  profitable  to 
bring  it  in,  and  it  will  be  profitable  to  carry  it  away.    The 


88  ECONOMICS. 

equilibrium  therefore  cannot  be  much  disturbed.  But 
with  such  a  medium  of  exchange  as  that  which  our 
country  now  employs,  the  quantity  may  be  indefinitely 
increased  or  diminished  without  involving  any  change  in 
the  employment  of  either  labor  or  capital.  Its  increase 
or  diminution  depends  only  on  the  greater  or  less  activity 
of  a  single  printing  press.  The  necessities  or  the  caprices 
of  the  government  may  expand  or  contract  its  volume  in- 
definitely. If  it  is  in  excess,  it  is  money  no  where  except 
within  our  national  lines,  and  has  therefore  no  outlet. 
Increasing  the  quantity  only  diminishes  its  value,  and' 
the  system  provides  no  remedy  for  the  fluctuation. 

Various  efforts  have  been  made  to  discover  whether 
we  have  an  excess  or  a  deficiency  of  currency.  But  such 
attempts  are  mere  guess-work.  We  have  no  standard 
by  which  to  judge.  Accordingly  the  most  widely  op- 
posite opinions  are  expressed.  All  are  alike  worthless. 
In  one  way  only  can  the  question  be  decided.  Bring 
our  medium  of  exchange  to  a  par  with  that  of  the  rest 
of  the  world.  Open  the  communications  between  it  and 
the  great  monetary  ocean,  and  the  question  will  soon  be 
decided.  If  our  medium  of  exchange  is  redundant,  it 
will  flow  outward  and  the  level  will  sink.  If  it  is  defi- 
cient it  will  flow  inward,  and  the  level  will  rise. 

§  65.  Our  statesmen  and  legislators  have  been  much 
perplexed  in  trying  to  discover  some  means  of  rendering 
our  currency  elastic.  By  elasticity  they  of  course  mean  a 
capability  of  spontaneously  expanding  and  contracting 
its  volume,  according  as  exchanges  are  more  or  less 
active.  It  is  even  proposed  that  when  money  is  excessive 
m  the  hands  of  the  people,  so  that  they  are  unable  to 
find  satisfactory  modes  of  investing  it,  the  government 
shall  borrow  it  of  them,  and  pay  them  interest  for  it,  by 
issuing  a  convertible  interest-bearing  bond,  which  may 
at  any  time  be  given  in  exchange  for  greenbacks,  and  re* 


RELATION    OF   GOVERNMENT   TO   MEDIUM.  89 

deemed  in  greenbacks  on  the  demand  of  the  holder.  If 
such  a  law  is  enacted  the  government  should  carry  out 
the  principle  of  it  to  its  logical  consequences.  Consis- 
tency would  require  that  when  the  people  want  work  and 
cannot  find  it  at  satisfactory  wages,  the  government 
should  employ  them  at  moderate  wages,  till  they  can  find 
more  lucrative  employment  elsewhere.  A  government 
that  undertakes  to  find  investment  for  all  idle  capital, 
should  surely  furnish  occupation  for  all  unemployed 
laborers  also. 

Such  a  medium  of  exchange  as  ours  can  have  no 
such  quality  of  elasticity  as  is  so  anxiously  sought  for. 
Indeed  the  quality  needed  is  not  elasticity  but  fluidity, 
and  that  can  be  provided  for  only  by  a  free  and  open 
communication  with  the  currency  of  the  world. 

§  66.  We  are  not  of  the  number  of  those  who  think 
that  the  unsatisfactory  condition  of  trade  which  has  ex- 
isted in  this  country  for  several  years^  is  wholly  referable 
to  any  one  cause.  Many  causes  have  probably  conspired 
to  produce  it.  But  of  these  our  unstable  medium  of  ex- 
change is  doubtless  one  of  the  chief.  It  has  impaired  men's 
confidence  in  the  future  and  rendered  them  incapable  of 
relying  on  any  calculations  respecting  it.  Excessive 
caution  is  the  characteristic  of  the  time,  not  greater  in- 
deed than  the  uncertainties  which  surround  us  justify, 
but  such  as  to  render  energy  and  enterprise  in  trade 
dangerous  and  to  a  great  extent  impossible.  It  seems 
to  every  intelligent  thoughtful  man,  that  he  knows  not 
what  shall  be  on  the  morrow.  Confidence  in  men  and 
in  the  order  of  things  around  us  is  one  of  the  most  po- 
tent elements  in  the  economic  world.  That  element  is 
at  the  present  time  in  this  country  singularly  impaired 
by  an  unstable  currency,  and  by  the  lack  of  any  satis- 
factory proof,  that  the  political  forces  that  govern  us  can 
be  relied  on  to  relieve  us  of  this  oppressive  burden,  by 


pO  ECONOMICS. 

which  all  the  movements  of  trade  have  been  for  years 
overweighted  and  retarded. 


CHAPTER  V. 

Credit  and  Paper  Money. 


§  67.  If  we  would  construct  a  true  economic  system, 
we  must  leave  out  of  the  consideration  none  of  the  forces 
of  human  nature^  which  have  any  influence  on  it.  One 
of  these  is  credit.  It  claims  and  will  have  its  place  in  the 
system,  whatever  our  theories  about  it  may  be.  It  is 
natural  for  every  man  to  repose  more  or  less  confidence 
in  his  fellows.  If  it  were  not,  society  would  be  impossi- 
ble, and  solitude  better  than  any  human  intercourse. 
Confidence  always  occupies  a  much  larger  place  in  the 
economic  arrangements  of  the  world  than  we  are  apt  to 
suppose.  Whenever  any  one  has  more  capital  than  his 
own  labor  can  employ,  he  is  compelled  to  entrust  it  in 
some  form  to  other  hands  ;  and  in  every  possible  mode 
of  employing  it,  he  is  forced  to  place  more  or  less  con- 
fidence in  those  by  whose  labor  his  surplus  capital  is 
made  productive.  If  he  hires  laborers,  they  are  not 
mere  machines,  but  rational  free  agents,  and  no  super- 
intendence can  entirely  secure  him  against  liabilities  to 
suffer  from  their  unfaithfulness.  Every  laborer  of  what- 
ever grade  has  a  character,  which  renders  his  services 
more  or  less  desirable  to  an  employer,  and  either  has 
the  benefit  of  credit,  or  suffers  from  the  want  of  it. 
Credit  is  an  element  which  cannot  be  eliminated  from 
any  arrangement  by  which  one  man  labors  with  the  capi- 
tal of  another.  All  such  transactions  are  more  alike 
in  principle  than  they  seem  to  be.     All  use  of  capital 


CREDIT  AND  PAPER  MONEY.  9I 

requires  not  only  the  exertion  of  muscular  power,  but  of 
mind  power  to  direct  it  to  its  end.  Wlien  one  hires 
laborers  to  employ  his  capital,  he  exercises  the  mind  force 
himself,  as  far  as  possible,  and  leaves  as  little  of  it  to  the 
laborer  as  he  can.  The  laborer  therefore  only  receives 
pay  for  his  muscular  force  and  such  small  exercise  of 
rationality  as  is  necessary  to  the  common  laborer.  The 
compensation  for  the  mind  force  the  employer  reserves  to 
himself.  Sometimes  a  laborer  is  hired  in  such  a  manner 
as  to  allow  him  a  large  scope  for  the  exercise  of  his  mind 
force,  and  greatly  to  relieve  the  employer  from  superin- 
tendence, and  is  paid  accordingly.  The  element  of 
credit  enters  much  more  largely  into  such  a  contract 
than  into  the  employment  of  a  common  laborer.  In  still 
another  class  of  contracts  the  owner  surrenders  his  capi- 
tal entirely,  for  a  limited  time,  into  the  hands  of  another^ 
and  is  quite  relieved  from  all  superintendence  of  labor, 
only  exacting  from  the  person  to  whom  he  entrusts  it  a 
promise  to  return  it  or  an  equivalent  agreed  upon,  at  a 
fixed  time,  with  a  stipulated  compensation  for  its  use. 
It  is  common  to  apply  the  word  credit  only  to  the  case 
in  which  the  owner  entrusts  his  capital  entirely  to  an- 
other for  a  limited  time.  But  it  is  plain  that  it  is  appli- 
cable in  various  degrees  to  all  the  other  cases,  and  can 
never  be  absent  from  any  transaction  in  which  the  labor 
of  one  man  employs  the  capital  of  another. 

Credit  is  therefore  one  of  the  natural  forces  with 
which  we  must  deal,  and  an  economic  system  which 
should  fail  to  find  its  true  place  would  be  radically  de- 
fective. 

Definition,  Credit  is  the  confidence  which  any  07ie  in- 
spires  by  his  integrity,  energy  and  skill  in  affairs. 

The  methods  by  which  it  becomes  influential  in 
economic  arrangements,  are  very  various  and  for  the 
oost  part  quite   spontaneous,  and  are  so  simple   and 


92  ECONOMIC!;. 

natural  as  to  require  no  particular  notice  here.  Some 
of  them  however  are  more  artificial  and  complicated, 
and  on  account  of  the  important  relations  which  they 
sustain  to  the  whole  system  of  exchange,  require  a  more 
particular  explanation. 

§  68.  One  of  the  most  important  of  these  is  Banking, 
This  in  all  its  varieties  and  modifications  involves  the 
principle  of  credit.  Banks  perform  four  distinct  func- 
tions, and  are  known  as  Banks  of  deposit^  Banks  of  dis- 
count and  exchange^  Banks  of  loan  and  Banks  of  issue. 

In  any  community  in  which  numerous  exchanges  are 
to  be  made,  a  Bank  of  deposit  is  a  necessity.  Any  one 
who  has  many  exchanges  to  make  must  necessarily  keep 
on  hand  a  considerable  amount  of  the  instrument  by 
which  exchanges  are  effected.  An  accumulation  of 
money  at  any  one  place  requires  expensive  precautions 
to  protect  it  against  robbery.  It  is  no  more  expensive 
to  furnish  these  safeguards  for  a  large  sum  than  for  a 
small  one.  If  therefore  an  individual  or  a  company  pos- 
sessing in  a  high  degree  the  confidence  of  the  public 
provides  such  a  place  of  safety,  and  offers  to  receive 
money  for  safe  keeping  on  reasonable  terms,  many  per- 
sons will  gladly  avail  themselves  of  it.  This  can  always 
be  done  without  any  expense  to  the  depositors.  For  the 
managers  of  the  bank,  having  a  large  amount  in  their 
hands  deposited  by  many  individuals,  can  always  have 
the  fullest  assurance  that  it  will  not  all,  or  even  a  very 
large  proportion  of  it,  be  demanded  at  any  one  time. 
As  taking  one  day  with  another,  every  man  must  receive 
as  much  as  he  pays  out,  it  may  be  expected  that  each 
individual  will  deposit  as  much  as  he  draws,  and  that 
while  one  man  is  drawing  out,  another  will  be  deposit- 
ing. The  managers  of  the  bank  may  therefore  at  all 
times  lend  a  considerable  portion  of  their  deposits,  re- 
ceiving interest  for  the  same.     In  this  way  they  may 


CREDIT   AND   PAPER    MONEY.  93 

easily  and  safely  obtain  remuneration  for  the  expense  and 
trouble  of  taking  care  of  deposits,  without  any  expense 
to  the  depositor.  It  must  however  be  borne  in  mind, 
that  much  wisdom  and  integrity  are  necessary  in  order 
that  such  loans  may  always  be  restrained  within  the 
limits  of  perfect  safety.  A  rash,  imprudent,  unscrupu- 
lous banker  may  and  often  does  expose  his  customers 
to  great  loss.  The  managers  of  a  bank  of  deposit  have 
need  not  only  to  possess  but  to  deserve  the  highest 
credit. 

§  69.  A  bank  of  deposit  will  almost  of  course  and  by 
necessity  become  an  important  auxiliary  in  exchanges. 
The  counting  and  handling  of  money  will  by  its  assist- 
ance be  almost  entirely  dispensed  with.  Any  customer 
of  the  bank  makes  his  payments  for  the  most  part  by 
checks.  Each  check  is  charged  to  the  account  of  the 
drawer,  and  credited  to  the  account  of  the  person  in 
whose  favor  it  is  drawn.  Thus  the  whole  transaction, 
however  large  the  check,  is  completed  without  the  use  of 
any  money  at  all,  merely  by  writing  a  few  words  in  the 
books  of  the  bank.  The  labor  thus  saved  to  a  great 
trading  community  is  immense. 

The  same  things  may  be  done  with  very  little  modi- 
fication of  the  process,  between  individuals  depositing  in 
different  banks,  and  even  residing  at  a  great  distance 
from  each  other. 

So  extended  and  complete  is  the  banking  system  of 
the  civilized  world,  that  payments  between  dealers  in 
cities  and  countries  however  remote  from  each  other  are 
generally  effected  by  checks  and  drafts,  without  any  trans- 
fer of  money,  except  the  amount  by  which  the  purchases 
of  one  country  or  one  city  may  exceed  those  of  another. 
The  extent  to  which  the  remotest  portions  of  the  earth 
are  bound  together  by  these  invisible  bonds  of  mutual 
credit,  as  invisible  and^yet  as  strong  as  gravitation,  is 


94  ECONOMICS. 

highly  honorable  to  human  nature,  and  strikingly  illus 
trates  the  vastness  of  the  area  of  modern  civilizationj 
and  of  the  economic  system  that  pervades  it. 

The  banks  which  perform  this  function  are  banks  of 
exchange,  and  do  not  necessarily  require  any  legislative 
sanction,  or  the  conferring  of  any  special  privileges  by 
act  of  the  government.  They  need  nothing  in  this  re- 
gard except  protection  of  every  man's  rights  of  property, 
and  the  impartial  enforcement  of  the  obligations  of  con- 
tracts according  to  their  true  intent  and  meaning.  They 
are  in  no  sense  the  creatures  of  legislation. 

§  70.  Banks  of  Deposit  and  Exchange  very  naturally 
become  to  a  certain  extent.  Banks  of  Loan.  They  lend 
so  much  of  their  deposit  fund  as  is  not  needful  to  be 
kept  on  hand,  to  secure  the  entire  safety  of  their  deposi- 
tors. The  loaning  of  money  is  a  business  as  truly  legiti- 
mate as  any  other.  The  subject  of  interest  on  money 
will  be  discussed  in  another  place.  It  is  enough  to  say 
of  it  here,  that  there  are  many  persons  who  have  money 
which  they  cannot  employ  in  active  business.  It  is 
greatly  to  their  advantage  and  to  the  advantage  of  the 
whole  community,  that  all  capital  should  be  actively  em- 
ployed. It  is  better  for  its  owners  to  live  on  the  interest 
of  their  capital  than  to  consume  their  principal,  and  it  is 
a  great  advantage  to  persons  having  skill  and  power  to 
labor,  to  obtain  at  a  moderate  rate  of  interest,  the  means 
of  procuring  tools  and  material,  by  which  they  can  ren- 
der their  labor  and  skill  available.  Banks  often  render 
a  very  valuable  service  by  collecting  together  such  idle 
capital,  and  lending  it  to  those  who  need  it,  and  are  able 
and  willing  to  make  reasonable  compensation  for  the  use 
of  it.  For  the  performance  of  this  function,  no  legislative 
grant  of  peculiar  privileges  is  at  all  necessary.  It  may 
be  performed  by  a  single  individual,  or  by  several  indi* 
viduals  in  an  ordinary  partnership. 


CREDIT  AND   PAPER   MONEY.  95 

§  71.  There  is  another  banking  function  which  re- 
quires a  rather  more  detailed  examination.  //  is  the  issu- 
ing notes  payable  on  demand  to  be  circulated  as  a  medium 
of  exchange^  instead  of  gold  and  silver.  Such  bank  notes 
are  called  Paper  Money.  They  can  be  called  so  only  by 
a  ra^'.her  violent  figure  of  speech.  No  paper  can  be  truly 
money.  A  bank  note  is  nothing  more  than  a  piece  o{ 
paper  with  a  promise  of  some  individual  or  corporation 
inscribed  on  it,  to  pay  a  given  amount  of  money.  To 
call  such  a  promise  money,  is  a  use  of  language  which 
strongly  tends  to  that  confusion  of  thought  which  is  at 
present  so  prevalent  in  relation  to  the  subject  of  money. 
Such  a  promise  can  only  obtain  general  circulation  in 
any  community  at  its  par  value,  on  condition  that  the 
people  have  implicit  faith  that  the  promiser  will  on  de- 
mand pay  what  he  has  promised.  On  this  condition  a 
bank  note  passes  from  hand  to  hand,  not  as  money,  but 
as  affording  to  the  holder  an  assurance  that  he  can  at 
any  time  obtain  the  money  by  demanding  it.  No  one 
can  deny  that  such  promises  to  pay,  when  implicitly  con- 
fided in  by  the  people,  have  certain  points  of  superiority 
for  general  circulation  over  gold  and  silver.  If  one  has 
need  to  draw  from  a  bank  the  sum  of  one  thousand  dol- 
lars, it  is  surely  much  easier  and  more  convenient  to  take 
from  the  bank  an  assurance  that  the  money  will  be  paid 
on  being  demanded,  and  with  that  paper  to  obtain  what- 
ever one  needs  to  purchase,  than  to  carry  away  from 
the  bank  a  bag  containing  one  thousand  dollars  in  gold 
or  silver.  If  those  with  whom  one  wishes  to  deal  have 
implicit  faith  in  the  assurance  which  is  expressed  on 
<hat  piece  of  paper,  it  will  be  more  agreeable  and  con- 
venient to  them  to  receive  that  paper  in  payment  for 
what  they  sell  than  to  be  under  the  necessity  of  handling 
and  caring  for  bags  of  gold  or  silver.  It  is  in  the  nature 
of  the  case  highly  probable  that  for  the  sake  of  such  a 


g6  ECONOMICS. 

substantial  convenience,  men  will  always  continue  to  use 
in  the  transactions  of  exchange  some  such  expression  of 
credit,  to  save  themselves  the  inconvenience  of  handling 
and  transporting  the  precious  metals. 

During  a  large  portion  of  our  history  the  advantages 
of  some  such  use  of  credit  have  been  so  highly  prized 
and  so  much  insisted  on,  that  a  large  portion  of  the 
money  in  circulation  has  consisted  in  such  promises  to 
pay.  Banks  were  incorporated  in  great  numbers  by  the 
legislatures  of  the  several  states.  They  were  for  the 
most  part  limited  corporations,  the  stockholders  of  which 
were  liable  for  the  debts  of  the  company  only  to  the 
amount  of  their  stock,  and  had  a  right  to  issue  their 
notes  payable  on  demand  for  general  circulation.  In  the 
year  1856  no  less  than  one  thousand  four  hundred  such 
State  banks  were  in  existence  in  the  United  States.  In 
New  England  alone  were  five  hundred  and  seven,  with 
an  aggregate  capital  of  one  hundred  and  fourteen  million 
six  hundred  and  eleven  thousand,  seven  hundred  fifty- 
two  dollars.  The  losses  experienced  by  the  failure  of 
such  banks  to  redeem  their  notes  were  enormous  almost 
beyond  belief,  and,  before  the  outbreak  of  the  war  in 
1861,  had  wrought  in  the  minds  of  thinking  men  gener- 
ally the  conviction,  that  the  system  was  radically  unsound 
and  untrustworthy. 

§  72.  Perhaps  it  is  not  difficult  to  point  out  in  what 
the  unsoundness  consists.  Men's  eagerness  for  substitut- 
ing a  paper  currency  for  real  money  was  a  delusion,  a 
sort  of  madness.  Credit  is  abundantly  capable  of  ob- 
taining for  itself  all  necessary  expansion,  without  being 
stimulated  by  any  artificial  legislative  helps  and  inven- 
tions. The  active  enterprise  of  an  intelligent,  industri- 
ous, commercial  people  will  easily  devise  methods  of 
supplying  all  the  substantial  conveniences  of  a  paper  cur- 
rency, without  acts  of  incorporation  or  the  endowment  o 


CREDIT   AND    PAPER   MONEY.  97 

banking  institutions  with  special  privileges,  to  enable 
them  to  supply  such  a  currency  for  the  use  of  the  peo- 
ple. The  experience  of  a  century,  both  in  this  country 
and  in  England,  has  demonstrated,  that  the  demand 
notes  of  incorporated  banks  are  a  very  untrustworthy 
medium  of  exchange.  Credit  should  never  be  interfered 
with  by  legislation.  If  an  individual  or  a  private  co  part- 
nership can  procure  so  much  credit  in  the  community 
that  their  notes  payable  on  demand  will  circulate  as  a 
medium  of  exchange,  we  know  no  reason  why  the  law 
should  interfere  between  them  and  the  public.  Each 
man  may  be  safely  left  to  take  care  of  himself  But  men 
who  issue  such  notes  should  be  held  responsible  for  their 
redemption  to  the  full  extent  of  all  their  property.  Men 
who  are  held  to  such  a  liability  will  be  very  cautious  how 
they  issue  promises  to  pay  on  demand  which  they  can- 
not perform.  No  advantages  of  a  paper  circulation  can 
possibly  compensate  for  the  disasters  which  experience 
has  shown  to  be  inseparable  from  allowing  banks  of  a 
limited  responsibility  to  issue  their  notes  as  the  circulat- 
ing medium  of  a  community.  We  do  not  believe  that  ex- 
periment will  ever  be  tried  again  in  the  United  States. 
"A  burnt  child  dreads  the  fire." 

§  73.  The  war  from  1861  to  1865  gave  the  United 
States  a  new  monetary  system  which  it  is  necessary  to 
examine.  That  part  of  it  which  consists  of  Treasury 
Notes,  called  Greenbacks,  we  have  already  examined,  in 
speaking  of  the  legal  tender  law.  The  necessities  of  the 
government  during  that  war  were  such  as  to  compel 
it  to  resort  to  every  practicable  method  of  borrowing 
money.  Out  of  these  necessities  grew  our  present  novel 
system  of  national  banks,  which  so  far  as  circulation 
is  concerned,  has  superseded  the  State  banks  in  all  por- 
tions of  the  country,  except  the  Pacific  Coast.  The 
national  banks  are  all  organized  under  a  law  of  the 
5 


98  ECONOMICS. 

United  States.  A  bank  is  constituted  by  depositing  the 
amount  of  its  capital  stock  in  bonds  of  the  United  States 
with  the  Treasurer  of  the  United  States,  as  security  for 
the  redemption  of  the  notes  which  it  issues.  It  receives 
back  ninety  per  cent  of  the  same  in  officially  certified 
notes,  which  the  bank  issues  to  its  customers,  and  it  can 
circulate  no  notes  not  so  certified.  The  notes  of  these 
banks  thus  secured  and  certified  are  receivable  for  all 
taxes  except  impost  duties,  and  for  all  dues  to  and  from 
the  United  States  except  interest  of  the  national  debt. 
They  are  redeemable  on  demand  in  lawful  money  of  the 
United  States,  including  of  course  greenbacks,  so  long 
as  they  continue  to  be  by  law  legal  tender.  As  long 
therefore  as  the  banks  redeem  their  notes  on  demand 
as  the  law  requires,  their  value  will  be  precisely  equal  to 
that  of  greenbacks.  If  any  bank  fails  to  redeem  its 
notes  as  the  law  requires,  its  affairs  will  be  wound  up  by 
authority  of  the  government,  its  notes  will  be  redeemed 
out  of  the  Treasury  of  the  United  States,  which  will  be 
re-imbursed  by  the  sale  of  the  deposited  bonds  of  the 
bank  to  the  highest  bidder.  So  long  therefore  as  the 
United  States  keeps  its  depreciated  legal  tender  notes 
in  circulation,  the  national  bank  notes  will  be  a  deprecia- 
ted currency  also.  During  the  continuance  of  the  war, 
these  banks  afforded  the  government  great  assistance  in 
raising  money,  for  many  capitalists  were  eager  to  pur- 
chase the  bonds  of  the  United  States  for  the  purpose  of 
using  them  in  profitable  banking. 

In  all  the  ordinary  conditions  of  our  national  life,  tht 
security  for  the  redemption  of  national  bank  notes  in  legal 
tefider  of  the  United  States  is  absolute.  The  credit  of  the 
notes  of  every  national  bank  issued  according  to  law 
must  be  exactly  equal  to  that  of  the  government,  for  the 
faith  of  the  government  is  pledged  for  their  redemption. 
If  a  bank  fails  the  government  will  redeem  its  notes.     If 


CREDIT   AND    PAPER    MONEY.  99 

hereafter  the  government  shall  do  the  tardy  justice  of  re- 
deeming its  own  long  unfulfilled  promises  to  pay,  and 
shall  remove  from  its  statutes  that  anomalous  law,  which 
compels  the  people  to  receive  the  government's  promises, 
however  long  unfulfilled,  in  payment  of  all  debts,  there 
will  then  remain  no  legal  tender  of  the  United  States  but 
gold  coin ;  and  the  national  banks  will  be  forced  to  redeem 
their  notes  in  gold,  or  go  into  liquidation,  and  in  the  latter 
alternative  the  United  States  Treasury  will  redeem  their 
notes  in  gold.  A  more  perfect  security  for  the  redemp- 
tion of  national  bank  notes  than  would  exist  if  the  United 
States  fulfilled  its  own  promises,  would  be  inconceivable. 
This  will  be  admitted,  we  think,  by  all  candid  men. 

§  74.  /y  then  our  national  banking  system  to  be  ac- 
cepted as  a  satisfactory  and  final  solution  of  the  question  so 
long  and  so  fiercely  agitated,  of  banks  and  paper  money  2 
We  think  not  for  the  following  reasons  : 

First,  The  credit  of  the  banks  under  this  system 
must  always  suffer,  when  from  any  even  temporary  cause^ 
the  credit  of  the  government  suffers.  Unfortunately  we 
cannot  assume  that  a  severe  strain  has  been  brought 
upon  our  country's  credit  for  the  last  time,  and  should 
such  an  event  occur  again,  while  we  have  our  present 
national  banking  system,  the  immediate  consequence 
must  be  a  depreciation  of  our  whole  currency  in  general 
use,  which  must  greatly  intensify  the  effect  of  national 
calamity.  A  medium  of  exchange,  to  be  sound,  must  not 
rest  on  mere  opinion  in  respect  to  the  solvency  of  any 
government,  but  on  solid  permanent  desirableness,  as 
estimated  by  the  whole  civilized  world. 

Second,  Though  our  national  banks  afford  a  satis- 
factory security  for  the  redemption  of  their  notes,  they 
afford  no  adequate  security  for  the  re-payment  of  deposits. 
Formerly,  in  times  of  financial  difficulty,  the  untrustwor- 
.hiness  of  our  banks  manifested  itself  in  their  inability  tc 


lOO  ECONOMICS. 

redeem  their  notes.  Under  our  present  banking  system^ 
it  has  appeared  in  their  inability  to  repay  their  deposi- 
tors on  demand.  It  matters  not  in  which  of  these  two 
ways  the  disaster  comes,  one  is  just  as  fatal  as  the  other. 
Our  national  banking  system  affords  no  adequate  security 
against  destructive  failure  in  this  last  form.  It  may  be 
said,  and  with  some  truth,  that  perfect  security  against 
such  failure  is  impossible.  But  this  being  granted  as 
true,  should  effectually  warn  us  against  building  up  any 
such  great  artificial  system  of  credit  on  the  basis  of 
special  legislative  provisions.  Credit  is  one  of  the  great 
natural  forces  of  the  world's  economic  system.  But  it  is 
for  that  very  reason  a  delicate  thing  for  governments  to 
meddle  with.  It  is  a  dangerous  experiment  for  a  govern- 
ment to  establish  a  vast  net-work  of  banks  to  cover  half 
a  continent,  to  receive  for  safe  keeping  the  spare  funds 
of  many  millions  of  people,  while  the  prii^ate  property  of 
those  who  are  interested  in  founding  and  managing  these 
institutions  is  not  held  responsible  for  the  safe  keeping 
of  the  funds  which  may  be  deposited  with  them.  Let 
credit  be  free  and  unrestrained.  Let  any  man  who  de- 
sires to  receive  the  money  of  his  fellow-citizens  for  safe 
keeping  obtain  as  much  of  their  confidence  as  he  can 
on  simple  personal  responsibility.  Let  all  who  choose 
commit  their  money  to  his  charge.  But  let  not  the  gov- 
ernment provide  any  means  by  which  any  portion  of  his 
property  may  be  exempted  from  responsibility  to  redeem 
his  pledges  to  those  who  have  trusted  him.  Let  govern- 
ment interfere  in  no  way  whatever  with  the  natural  and 
spontaneous  development  of  credit.  Let  it  confine  itself 
to  its  own  proper  function  of  rigidly  enforcing  all  con- 
tracts according  to  the  true  intent  and  meaning  thereof. 
The  financial  disasters  which  occur  under  such  a  sys- 
tem, may  fairly  be  presumed  to  be  unavoidable  by  any 
human  wisdom  or  invention. 


CREDIT  AND  PAPER  MONEY.  lOl 

Third,  In  the  nature  of  the  case  this  system  can  only 
last  as  long  as  our  national  debt  remains  unpaid.  If  the 
time  ever  again  comes  when,  as  in  former  years,  we  are 
a  nation  without  a  national  debt,  there  will  be  no  na- 
tional bonds  in  the  market,  which  can  be  used  as  the 
basis  of  a  national  banking  system.  The  banks  now  in 
existence  must  go  into  liquidation,  because  the  founda- 
tion on  which  they  are  constructed  will  have  ceased  to 
exist.  We  shall  then  have  no  banks  and  no  paper 
money,  or  we  must  construct  a  new  monetary  system  on 
some  other  principle. 

§  75.  Perhaps  the  ultimate  and  normal  condition  of 
the  economic  world  in  relation  to  this  matter  of  paper 
money,  will  be  found  to  be,  that  credit  will  everywhere 
be  left  to  its  own  spontaneous  development,  according 
to  its  own  natural  laws,  with  no  artificial  contrivances 
to  stimulate  or  to  check  it.  It  may  be  asked,  why  not 
adopt  the  plan  of  a  great  national  bank  like  that  of  Eng- 
land, and  those  of  other  nations  ?  That  suggestion  does 
not  seem  worthy  of  any  special  examination  in  this  place. 
The  efforts  which  we  have  made  in  that  line  have  not 
resulted  in  such  a  way,  as  to  encourage  further  experi- 
ments of  the  same  sort.  Past  experience  would  suggest 
grave  doubts,  whether  a  great  national  bank  like  that  of 
England  can  ever  be  amalgamated  with  our  institutions 
and  character.  Why  should  we  desire  to  experiment 
further  in  that  direction  ?  It  must  be  obvious  even  now 
to  all  well  informed  persons,  that  those  vast  lines  of 
confidence  and  exchange  which  rank  among  the  grand- 
est characteristics  of  modern  civilization,  are  controlled 
by  private  bankers,  who  owe  nothing  to  any  legislative 
tinkering  or  favoritism.  The  natural  development  of 
credit  over  the  economic  world  has  produced  private 
banking  houses,  that  are  fully  adequate  to  be  the  fiscal 
agents  of  great  nations,  and  even  to  negotiate  the  war- 


I02  ECONOMICS. 

loans  of  aL  Europe.  Why  then  should  it  be  doubted 
that  credit,  without  being  aided  or  interfered  with  by  any 
of  the  governments  of  the  world,  is  capable  of  furnishing 
to  the  individual  merchants  and  travellers  of  all  countries, 
all  the  substantial  conveniences  and  advantages  which 
have  ever  been  supposed  to  be  derived  from  banks  and 
paper  money? 


CHAPTER   VI. 

"Die  Functions  of  Credit. 

§  76.  From  what  has  already  been  said  it  is  obvious 
at  a  glance,  that  the  influence  of  credit  on  the  working  of 
the  whole  economic  machine  must  be  exceedingly  great.  It 
has  been  shown  that  without  it  no  man  could  ever  find 
use  for  any  more  capital  than  his  own  hands  could  em- 
ploy; for  the  moment  he  entrusted  it  to  another  hand  to 
be  used  in  production,  the  operation  of  credit  would 
begin  All  mutual  dependence,  all  mutual  helpfulness, 
all  human  society  inevitably  implies  credit.  The  una- 
voidable necessity  of  such  uses  of  credit  none  will  deny. 

A  little  consideration  will  satisfy  us,  that  the  necessity 
of  some  of  the  more  extended  and  seemingly  optional 
forms  of  credit  is  scarcely  less  imperative.  The  first  of 
these  which  requires  to  be  particularly  mentioned  is  its 
influence  in  quickening  exchanges.  The  producer  of 
any  commodity,  so  soon  as  he  has  completed  it,  has  need 
of  the  entire  investment  of  labor  and  capital  which  he 
has  placed  in  it,  to  be  used  again  in  further  production. 
Perhaps  his  capital  is  small  and  is  all  invested  in  that 
one  product.  He  must  therefore  either  by  sale  procure 
it  to  be  used  again,  or  he  must  borrow  the  capital  neces- 


THE   FUNCTIONS   OF   CREDIT.  IO3 

St»  CD  procure  more  material,  and  the  means  of  living 
wh  e  he  employs  himself  on  some  other  product,  or  he 
ma^t  cease  to  work,  and  his  means  of  present  support 
must  fail.  If  he  could  dispose  of  the  product  on  hand 
to  some  one  of  good  credit  on  the  promise  of  payment  at 
the  end  of  six  months,  he  could  use  the  credit  of  the  pur- 
chaser in  addition  to  his  own,  and  thereby  procure  the 
capital  necessary  to  the  continued  prosecution  of  his 
trade.  The  man  who  purchased  on  credit  may  by  means 
of  that  very  purchase  also  have  been  enabled  to  prosecute 
a  successful  trade,  and  before  his  debt  falls  due,  have 
earned  the  means  of  redeeming  his  promise.  By  means 
of  that  credit  transaction  therefore  all  the  advantages  of 
an  immediate  sale  were  realized.  Had  not  the  pur- 
chaser procured  what  he  needed  on  credit,  two  men 
would  have  been  reduced  to  the  necessity  of  being  un- 
employed, through  the  tardiness  of  exchange.  Credit 
quickened  the  exchange,  and  procured  for  themselves 
and  the  community  the  benefit  of  their  labor.  What  oc- 
curred in  this  case  is  constantly  happening  in  all  indus- 
trious communities.  Credit  affords  great  and  much 
needed  facilities  for  bringing  all  products  into  use  as  soon 
as  they  are  ready  for  the  consumer.  Without  this  quick- 
ening influence  of  credit  on  exchanges,  all  industry  must 
move  heavily  and  slowly.  It  is  a  natural  provision  for 
bringing  the  producer  and  consumer  as  near  together  as 
possible. 

§  77.  Another  influence  of  credit  is  that  it  gives  to  the 
energetic  and  skillful  man  without  capital  almost  his  only 
chance  of  acquiri7ig  it.  The  world  of  trade  is  everywhere 
full  of  illustrations  of  the  great  advantage  to  be  derived 
from  the  laborer  owning  the  capital  with  which  he  works, 
and  being  therefore  able  to  regard  as  his  own  all  the 
benefits  of  his  energy  and  skill.  It  is  capable  of  work- 
ing wonders.     But  if  the  skillful  man  who  has  no  capital 


I04  ECONOMICS. 

cannot  obtain  it  on  his  credit,  he  must  in  most  cases  be 
a  mere  laborer  on  hire,  till  his  best  days  of  energy,  in- 
vention and  enterprise  are  past,  and  his  best  chances  of 
a  successful  life  gone.  The  capital  which  he  uses  only 
for  the  profit  of  another  will  produce  much  less  valuable 
results  than  it  would  have  done  if  he  could  have  used 
it  for  his  own  profit.  All  society  is  thereby  poorer.  No 
man  can  calculate  the  loss  to  modern  society,  which 
would  accrue  from  depriving  it  of  all  the  productive 
power  which  credit  in  this  way  produces.  Energy,  inven- 
tion,^nterprise  would  become  almost  useless  words.  The 
man  that  began  life  in  poverty,  must  almost  of  necessity 
end  as  he  began,  and  even  the  rich  would  be  much  less 
opulent  than  at  present.  The  greatest  fortunes  are  apt 
to  be  amassed  by  those  who  began  in  their  youth  with 
a  judicious  use  of  their  credit. 

§  78.  Another  function  of  credit  is,  greatly  to  dimin- 
ish the  amount  of  money  necessary  to  be  used  in  the  trans- 
action of  business.  Perhaps  the  simplest  illustration  of 
this  is  the  case  of  two  individuals,  who  have  frequent 
exchanges  with  each  other.  Neither  pays  any  money. 
What  each  buys  is  charged  in  the  books  of  the  seller. 
Perhaps  at  the  end  of  six  months  they  adjust  their  ac- 
counts. It  turns  out  that  the  purchases  of  each  are  very 
nearly  equal.  A  small  balance  only  remains  to  be  paid 
in  cash,  and  perhaps  even  that  may  be  charged  over  to 
a  new  account.  And  yet  perhaps  the  amount  of  traffic 
between  them  may  have  been  large.  In  this  way  credit 
transacts  a  large  amount  of  business  without  any  use  of 
money  whatever.  And  yet  the  existence  of  a  recognized 
medium  of  exchange  is  just  as  important  in  these  trans- 
actions, as  though  every  purchase  were  made  in  money. 
It  is  by  the  fact  that  the  value  of  every  thing  is  estimated 
in  a  recognized  medium  of  exchange,  that  these  accounts 
can  be  kept  with  so  much  ease  and  accuracy.     Money  is 


THE    FUNCTIONS    OF   CREDIT.  lO"; 

just  as  important  to  us,  when  we  do  our  exchanges  with- 
out it,  and  the  use  of  it  in  some  cases  enables  us  to  sub- 
stitute credit  for  it  in  many  other  cases. 

In  every  case  in  which  payments  are  made  by  checks 
or  drafts,  whether  payable  at  sight  or  on  time,  credit  is 
made  a  substitute  for  money,  and  by  so  much  diminishes 
the  amount  of  money  needed  to  transact  the  exchanges 
of  the  community.  This  becomes  quite  obvious  in  the 
operations  of  a  bank  of  deposit.  If  every  man  had  kept 
nis  money  in  his  own  hands  instead  of  depositing  it  with 
the  bank,  and  paid  by  counting  and  handing  over  money, 
the  whole  amount  of  the  deposits  of  the  bank  would  have 
been  no  more  than  sufficient  to  effect  the  exchanges  of 
the  depositors.  But  when  they  deposit  the  same  funds 
in  the  bank,  and  pay  by  checks,  it  is  found  that  one 
third  the  amount  will  suffice,  and  the  remaining  two 
thirds  can  be  placed  at  interest  with  entire  safety.  This 
fact  demonstrates  the  great  diminution  of  the  money  re- 
quired to  be  kept  in  circulation,  which  results  from  mak- 
ing payments  in  checks. 

The  same  tendency  of  credit  to  diminish  the  amount 
of  money  necessary  to  be  used  in  the  exchanges  of  a 
community  is  still  more  strikingly  apparent  in  the  use  of 
bank  notes  as  a  medium  of  exchange.  It  is  the  received 
opinion  that  a  bank  whose  specie  on  hand  is  equal  to 
one  half  its  notes  in  circulation  is  perfectly  safe.  If  this 
is  so,  then  the  currency  of  any  community  might  con- 
sist of  one  third  real  money,  and  two  thirds  paper  money, 
and  still  be  perfectly  sound.  But  two  dollars  in  every 
three  of  that  currency  would  represent  credit,  and  only 
one  in  three  would  be  real  money.  Such  a  currency, 
could  it  be  perfectly  insured  to  remain  such,  would  an- 
swer the  purposes  of  exchange  just  as  well  as  though 
it  were  entirely  composed  of  gold,  without  any  use  of 
paper  money.      Credit    would   therefore   diminish   the 


Io6  ECONOMICS. 

amount  of  real  money  necessary  to  negotiate  the  ex- 
changes of  that  community  by  two  thirds. 

§  79.  This  fact  is  the  one  truth  which  is  to  be  found 
amid  all  the  fallacies  of  paper  money.  No  method  has  ever 
yet  been  devised  by  which  banks  can  be  empowered  to 
issue  such  a  currency,  and  yet  be  effectually  restrained 
from  exceeding  in  its  issues  a  prescribed  and  definite 
limit.  Men  cannot  safely  place  confidence  in  such  banks. 
Sooner  or  later  their  issues,  or  their  indebtedness  in 
some  form,  will  not  only  transcend  all  prescribed  limits 
but  all  limits  of  prudence  and  safety.  Disaster  has  fol- 
lowed so  often  and  spread  ruin  so  widely,  that  the  prin- 
ciple must  be  given  up  as  an  utterly  unsafe  foundation 
for  a  medium  of  exchange. 

The  truth  however  still  remains,  that  by  methods 
which  are  perfectly  natural  and  safe,  credit  is  to  a  vast 
extent  made  a  substitute  for  money  in  conducting  the 
exchanges  of  the  world.  This  function  of  credit  has 
certainly  been  greatly  extended  during  the  present  cen- 
tury. Should  the  governments  of  the  world  at  length 
become  wise  enough  to  leave  the  operation  of  credit 
without  any  interference,  to  the  spontaneous  develop- 
ment of  its  own  laws,  this  function  will  yet  be  very 
greatly  extended,  and  the  efficiency  both  of  capital  and 
labor  be  much  more  aided  by  it,  than  hitherto. 

The  consideration  deserves  to  be  mentioned  that  this 
power  of  credit  to  diminish  the  amount  of  money  need- 
ful in  a  given  state  of  exchanges,  sustaifis  a  most  impor- 
tant relation  to  our  present  great  problem  of  a  return  to  a 
sound  currency.  It  may  readily  be  admitted  that  if  that 
problem  were  actually  to  substitute  gold  for  paper  in 
transacting  all  the  exchanges  of  the  country,  any  speedy 
solution  of  it  would  be  quite  out  of  the  question.  Such 
is  not  the  problem  however.  We  have  our  national  bank 
currency  strictly  limited  by  national  authority  so  far  as 


THE    FUNCTIONS    OF    CREDIT.  I07 

respects  the  ratio  it  sustains  to  the  stock  of  the  banks, 
and  depending  for  its  circulation,  not  on  individual  or 
corporate,  but  on  national  credit,  and  requiring  only  sc 
much  gold  as  will  enable  the  banks  to  redeem  their  bills 
on  presentation.  In  this  state  of  things,  with  this  ex- 
tensive use  of  our  national  credit  as  a  basis  in  part  of 
our  medium  of  exchange,  the  amount  of  gold  needful  to 
be  employed  will  probably  be  less  in  proportion  to  the 
amount  of  exchanges  to  be  transacted,  than  in  any  other 
country  of  the  world,  and  a  return  to  specie  payments 
must  be  comparatively  easy.  This  is  clearly  indicated 
by  the  fact  that  at  this  writing  both  greenbacks  and  na- 
tional currency  are  reported  at  a  discount  of  only  about 
five  per  cent. 

§  80.  Another  very  important  influence  of  credit  lies 
in  its  power  to  control  prices.  Such  a  power  it  must  neces- 
sarily possess.  Price  we  have  already  seen  varies  with 
demand,  and  evidently  demand  depends  largely  on  the 
use  which  is  made  of  credit.  If  no  exchanges  are  made 
on  credit,  transactions  must  be  limited  to  those  who  have 
money  in  hand.  But  if  credit  is  employed  with  freedom, 
all  who  have  good  credit  may  be  purchasers.  The  de- 
mand therefore  will  be  increased  by  precisely  the  amount 
purchased  on  credit,  which  could  not  have  been  pur- 
chased if  no  credit  had  been  used.  This  function  of 
credit  is  very  variable,  depending  very  greatly  on  men's 
hopes  or  fears.  In  times  of  prosperity  hope  preponder- 
ates and  credit  is  very  freely  employed.  Prices  as  a 
necessary  consequence  are  buoyant,  since  all  commodities 
are  in  demand.  In  times  of  adversity  men's  fears  pre- 
ponderate, and  the  use  of  credit  in  exchanges  is  reduced 
to  a  minimum.  As  a  necessary  consequence  demand 
diminishes  and  prices  decline. 

This  is  the  dangerous  and  critical  element  in  credit.  In 
circumstances  favoring  its  largest  development,  it  is  capa- 


I08  ECONOMICS. 

ble  of  so  raising  prices  as  for  the  time  being  to  render 
even  a  sound  currency  almost  useless  as  a  standard  of 
value,  and  when  concurring  with  an  unsound  currency, 
of  producing  a  sort  of  temporary  madness  in  whole  com- 
munities and  even  nations.  About  the  year  1836  the 
public  mind  throughout  our  country  became  greatly  ex- 
cited in  prospect  of  the  rapid  settlement  of  that  vast  area 
of  fertile  land  which  lies  in  the  Upper  Mississippi  valley. 
It  was  foreseen  that  in  the  life-time  of  men  then  living 
several  great  States  were  to  be  founded  in  what  was  then 
a  wilderness,  each  equal  in  wealth  and  population  to  a 
great  nation.  Men's  imaginations  were  greatly  excited. 
The  sites  of  the  great  cities  which  were  soon  to  be,  were 
selected,  and  laid  out  on  a  scale  of  such  magnificence, 
as  the  imagination  stimulated  by  the  hope  of  gain  could 
suggest,  where  not  as  yet  a  human  dwelling  had  been 
erected.  Lots  were  offered  for  sale  or  terms  requiring 
little  cash,  and  giving  long  credits  for  the  remainder. 
Those  small  payments  of  cash,  a  highly  inflated  currency 
rendered  it  easy  to  make,  and  about  the  future  few  had 
any  misgivings.  Tens  of  thousands  hastened  to  make 
their  fortunes  by  purchasing  western  city  lots.  The  ex- 
citement was  nearly  universal,  demand  increased  rapidly, 
and  prices  were  advanced,  being  limited  only  by  men's 
imaginations.  Men  believed  that  they  had  made  an 
independent  fortune  in  a  single  day,  when  those  fortunes 
existed  only  in  the  imagination.  After  a  few  months  the 
real  began  to  assert  itself  Men  must  return  from  this 
aerial  flight  to  the  actual  world.  Some  men  found  they 
must  have  money,  and  began  to  press  their  debtors  for  pay- 
ment. These  urged  others  to  pay  who  were  equally  un- 
able. All  turned  to  the  banks  ;  the  banks  were  as  unable  as 
individuals.  Their  credit  failed  them,  their  paper  money 
would  no  longer  circulate,  but  returned  upon  them  for 
redemption.     They  were  quite  unable  to  redeem  them. 


THE  FUNCTIONS  OF  CREDIT.  I09 

and  in  a  few  months  nearly  all  the  banks  in  the  country 
suspended  specie  payment,  and  universal  disaster  and 
almost  bankruptcy  followed.  Western  town  plats  were 
forgotten  or  remembered  only  in  sorrow,  and  the  nation 
wiser  but  sadder  turned  again  to  sober  industry.  There 
is  in  this  power  which  credit  possesses,  an  element  of 
danger,  which  is  inherent  in  its  very  nature,  of  which  the 
foregoing  narrative  presents  only  one  out  of  innumerable 
examples.  We  do  not  believe  this  danger  can  ever  be 
entirely  eliminated  from  the  use  qf  credit.  It  will  be  as 
small  as  possible  when  legislators  have  learned  that 
credit  is  too  delicate  a  thing  for  them  to  interfere  with  by 
their  clumsy  tinkering. 

§  81.  Perhaps  enough  has  already  been  said  of  that 
function  of  credit,  by  which  zf  binds  the  whole  civilized 
world  together  in  one  economic  whole  of  mutual  depend- 
ence and  mutual  helpfulness.  It  is  a  bond  of  universal 
attraction  as  invisible  and  impalpable  as  gravitation  it- 
self, and  yet  as  irresistible  and  indestructible.  The 
power  of  that  universal  attraction  to  bind  the  whole 
human  race  into  a  common  brotherhood  and  a  common 
civilization,  is  rapidly  increasing.  Every  new  improve- 
ment in  the  means  of  locomotion  and  inter-communica- 
tion among  the  various  populations  of  the  world,  extends 
the  area  of  credit,  and  intensifies  its  attractive  force. 
Theoretically  the  world  is  the  field  of  our  science,  and 
the  actual  condition  of  the  world  is  conforming  more  and 
more  to  the  theory. 


i  lO  ECONOMICS. 

CHAPTER    VII. 
Monopolies. 

§  82.  We  confess  to  having  felt  some  perplexity  aloui 
the  heading  to  be  employed  for  this  chapter.  The  thought 
occurred  to  us  to  call  it  "  International  Exchanges."  But 
the  thing  which  is  naturally  suggested  by  this  phrase  has 
no  existence  in  fact.  Nations  are  neither  producers  nor 
exchangers.  Both  these  are  individual  and  not  national 
functions.  Why  then  talk  of  international  exchanges, 
when  exchanges,  wherever  the  exchangers  may  happen 
to  live,  are  inter-individual  and  not  international.  In- 
dividual Englishmen  may  exchange  with  individual 
Frenchmen,  but  this  is  not  England  exchanging  with 
France.  Let  us  call  things  by  their  right  names,  if  we 
would  have  an  understanding  of  their  real  nature. 

What  we  wish  to  discuss  in  this  chapter  is,  the  eco- 
nomic character  of  certain  restrictions  on  exchanges, 
which  have  been  much  practiced  by  the  different  nations 
of  the  world  in  its  past  history.  It  seems  to  us  that  those 
restrictions  are  common  in  their  nature,  design  and  work- 
ing, and  they  are  all  fitly  described  by  the  word  which 
stands  at  the  head  of  this  chapter — Monopolies. 

Definition,  A  Monopoly  is  such  a  control  of  the  sup- 
ply of  any  desirable  object^  as  will  enable  its  holder  to  de- 
termine its  price  without  appeal  to  competition. . 

Some  monopolies  are  conferred  by  the  government, 
and  are  provided  for  by  legal  enactments.  Others  are 
secured  by  mere  combinations  of  capital  or  labor  or  both. 
Some  monopolies  are  entire,  protecting  their  holders 
against  all  competition.  Others  are  only  partial,  pro- 
curing for  their  holders  exemption  from  competition  only 
within   certain   limits.      But  protection    to   the   holder 


MONOPOLIES.  m 

against  the  competition  to  which  other  men  are  exposed 
is  the  common  aim  and  result  of  them  all. 

Monopolies  have  certainly  occupied  a  very  prominent 
place  in  the  arrangements  of  modern  Christendom,  and 
the  principle  of  monopoly  may  still  be  easily  discerned 
in  the  laws  and  institutions  of  most  countries,  nor  can  it 
be  justly  claimed  that  our  own  country  is  entirely  exempt 
from  them.  It  is  therefore  necessary,  before  leaving  the 
subject  of  exchange,  carefully  to  examine  their  nature, 
the  grounds  on  which  men  seek  to  justify  them,  and  their 
relations  to  the  economic  system. 

§  83.  Some  monopolies  are  defensible  on  sound  economic 
principles.  It  has  already  been  shown,  that  when  labor 
has  been  expended  in  giving  value  to  any  material  thing, 
the  laborer  thereby  acquires  the  ownership  of  the  sub- 
stance upon  which  he  has  exerted  his  labor.  If  that 
substance  was  the  property  of  a  previous  owner,  in  con- 
sequence of  labor  performed  in  producing  it,  the  last 
laborer  that  works  upon  it  must  compensate  the  previous 
owner.  But  if  it  was  without  value  when  it  came  into 
his  hand,  he  has  gained  the  entire  ownership  of  it,  by 
the  labor  he  has  expended  on  it,  and  may  exchange  it 
in  the  form  to  which  he  has  wrought  it  for  any  other 
value  which  he  can  obtain  for  it.  Thus  the  possession 
of  the  material  on  which  he  has  labored  insures  to  him 
compensation  for  his  labor  according  to  its  value.  If  a 
man  of  skill  has  made  a  table  out  of  wood  which  was  of 
no  value,  he  is  sure  of  being  paid  for  his  work  j  for  no 
one  can  make  a  table  of  equal  desirableness  with  less 
work,  and  tables  are  always  in  demand. 

But  there  are  products  of  great  value,  the  producers 
of  which  have  no  such  natural  assurance  of  obtaining  the 
reward  of  their  labor.  For  example,  an  ingenious  man 
invents  a  machine  which  is  of  great  value  to  the  labor 
of  the  world,  and  builds  a  model  or  exhibits  a  drawing 


112  ECONOMICS. 

of  it.  Any  ingenious  mechanic  may  from  that  model  or 
draft  construct  and  multiply  the  machine  indefinitely. 
The  labor  of  the  inventor  was  purely  intellectual  and  not 
connected  with  the  ownership  of  any  material  thing,  by 
the  sale  of  which  he  can  secure  his  own  reward.  As 
soon  as  his  thought  has  been  comprehended  by  another 
mind,  it  may  be  by  that  mind  communicated  to  any  num- 
ber of  minds  or  to  the  whole  world,  and  thus  pass  from 
the  inventor  without  any  compensation  whatever.  The 
public,  the  world,  can  well  afford  to  give  him  as  compen- 
sation for  disclosing  so  valuable  a  secret,  a  monopoly  of 
the  manufacture  and  sale  of  that  machine  for  a  limited 
number  of  years.  A  patent  right  confers  precisely  such 
a  monopoly.  No  right-minded  man  will  hesitate  to  ad- 
mit that  it  is  good  economy  for  the  government,  as  the 
representative  of  the  whole  community,  to  give  to  the 
inventor  of  such  a  machine  a  monopoly  of  its  sale,  and 
faithfully  to  protect  him  in  the  enjoyment  of  it.  If  it  is 
an  invention  of  universal  utility,  no  government  should 
refuse  to  grant  the  inventor  a  patent  right  on  his  appli- 
cation. It  should  be  granted  equally  to  an  alien  as  to  a 
native  born  citizen. 

The  same  may  be  said  of  the  copyright  of  books^  and 
of  the  products  of  purely  intellectual  labor  generally^  or 
more  generally  still,  of  any  product  of  labor  or  skill  the 
producer  of  which  has  no  natural  security  for  obtaining 
the  reward  of  his  labor.  The  principle  however  does 
not  apply  to  professional  skill  and  talent,  though  it  may 
be  purely  intellectual.  For  example  the  function  which 
the  lawyer  performs  is  one  of  urgent  necessity  for  the 
protection  of  the  rights  of  individuals.  No  man  can  per- 
form that  function  as  well  as  he  can,  with  less  natural 
talent  and  less  skill  than  he  possesses,  and  no  one  can 
acquire  the  requisite  knowledge  of  law  and  readiness  in 
applying  it  to  particular  cases  with  less  time  and  laboi 


MONOPOLIES.  113 

than  he  has  bestowed  upon  it.  He  has  therefore  every 
assurance  that  men  will  be  glad  to  pay  him  the  full  value 
of  all  the  professional  skill  which  he  possesses,  and  can 
put  in  no  valid  claim  to  be  protected  by  monopoly,  to 
secure  to  him  a  fair  compensation  for  the  service  he 
renders.  The  same  is  true  of  all  properly  professional 
labor. 

There  are  a  few  cases  in  which  labor  not  strictly  intel- 
lectual may  be  protected  by  a  monopoly.  Such  are  the  build- 
ing of  bridges,  and  the  establishing  of  expensive  ferries 
across  rivers  or  straits,  to  accommodate  public  traffic. 
It  might  often  be  true,  that  no  man  would  be  willing  to 
make  the  necessary  outlay,  unless  he  could  be  insured  a 
monopoly  of  the  carrying  trade  across  the  water  in  ques- 
tion, at  least  for  a  term  of  years.  In  such  a  case  the 
community  would  often  purchase  the  accommodation 
very  cheaply  by  granting  such  a  monopoly,  and  faithfully 
protecting  the  holder  in  the  full  enjoyment  of  it.  All 
these  are  cases  in  which  the  holder  of  a  monopoly  ren- 
ders to  the  community  a  full  equivalent  for  the  privilege 
conferred  on  him. 

§  84.  But  there  is  another  class  of  monopolies  of  a 
very  different  character  and  which  require  a  far  more 
thorough  and  exhaustive  examination.  If  we  mistake 
not  they  can  be  justified  by  no  plea  of  equivalent  service 
rendered  to  the  community.  We  refer  to  monopolies 
granted  to  certain  branches  of  industry  in  one  country^  to 
shield  them  against  the  competition  of  similar  industries  i?t 
other  countries.  We  find  examples,  in  all  exemption  from 
competition  granted  to  certain  branches  of  manufactures; 
to  shield  them  from  the  competition  of  like  manufactures 
in  foreign  lands,  by  imposing  discriminating  duties  on 
imported  products.  It  may  seem  to  some  a  mistake  to 
class  such  arrangements  under  the  head  of  monopolies. 
But  it  seems  to  us  that  they  belong  under  that  head  ir 


114  ECONOMICS. 

the  nature  of  the  case,  and  we  have  sought  in  vain  tc 
find  any  other  head  under  which  the  discussion  of  them 
can  be  introduced,  without  an  obvious  violation  of  logical 
arrangement.  No  fundamental  law  of  the  science  calls 
for  any  such  limitation  of  competition,  but  all  conspire 
together  to  protest  against  it.  Economic  principles  can 
deal  with  such  legislation  only  in  the  form  of  protest. 
In  principle  such  legislation  does  confer  a  monopoly, 
not  always  entire,  but  if  not  entire  at  least  partial.  Its 
effect  is  to  protect  one  person,  or  a  particular  class  of 
persons  from  a  perfectly  natural  competition,  which  they 
must  otherwise  encounter.  It  is  true  that  the  method  in 
which  the  end  is  sought  to  be  accomplished  is  not  by 
absolutely  forbidding  certain  products  to  be  sold  in  this 
country,  but  by  compelling  all  foreign  producers  to  com- 
pete with  the  American  manufacturer  under  such  con- 
ditions of  disadvantage,  as  to  amount  to  prohibition.  It 
is  proposed  to  accom.pl ish  this  by  levying  such  duties  on 
articles  manufactured  abroad,  that  the  foreign  producer 
cannot  pay  the  duty  and  still  compete  with  the  American 
producer.  It  is  assumed,  that  by  thus  driving  the  foreign 
producer  from  our  markets,  the  home  producer  will  be 
able  to  demand  such  prices  as  will  render  a  business  re- 
munerative, which  could  not  be  profitable  in  presence 
of  foreign  competition.  One  would  think  the  bare  state- 
ment of  the  case  might  suffice,  without  further  argument. 
No  injustice  can  be  done  by  calling  such  legislation  a 
monopoly  in  favor  of  the  American  manufacturer.  Such 
legislation  abounds  in  this  country  at  the  present  time, 
under  the  soft  and  taking  pretense  of  "  protecting  home 
industry." 

§  85.  The  phrase  '''■protection  of  home  industry  "  is  most 
infelicitousiy  and  unfairly  applied.  Protection  is  a  pre- 
cious thing,  in  which  every  good  citizen  believes.  To 
protect  the  industry  of  every  citizen,  to  secure  to  him  the 


MONOPOLIES.  115 

unobstructed  pursuit  of  his  legitimate  objects,  and  the 
full  enjoyment  of  all  the  products  of  his  labor,  is  the  most 
sacred  function  of  civil  government.  The  resources  of 
our  planet  can  never  be  fully  developed  and  applied  to 
the  uses  of  human  well-being,  till  every  portion  of  it 
where  man  can  dwell,  is  under  a  government  that  can 
and  will  protect  the  industry  of  every  dweller  on  the  soil. 
This  is  true  protection.  Let  the  phrase  "  protection  of 
home  industry  "  be  used  in  this  its  only  legitimate  sense, 
and  there  will  be  no  controversy  about  the  matter. 

But  in  the  use  that  is  made  of  the  phrase  by  the 
advocates  of  what  is  called  "  Protection,"  it  is  wrenched 
away  from  this  its  proper  and  universally  accepted  mean- 
ing, and,  without  any  even  pretense  of  definition,  applied 
to  a  device  of  their  own,  sustaining  no  relation  whatever 
to  the  proper  meaning  of  the  word.  Protection  implies 
that  the  thing  in  behalf  of  which  it  is  invoked,  is  in  dan- 
ger from  some  hostile  force.  In  this  use  of  the  word  the 
hostile  force  against  which  industry  is  to  be  protected  is 
natural  competition.  The  interposition  of  the  government 
is  invoked  to  shield  certain  people  from  competition  in 
trade,  in  order  that  they  may  be  able  to  set  such  prices 
on  their  wares  as  will  be  satisfactory  to  themselves.  As 
they  press  their  demands  upon  the  government,  they  ask 
in  tones  somewhat  lugubrious ;  will  not  our  government 
protect  the  industry  of  our  own  citizens  ?  This  assump- 
tion is  always  false.  Natural  co7npetition  is  the  enemy  of 
no  legitimate  business.  It  only  determines,  what  all  the 
world  is  interested  in  knowing,  who  can  make  a  given 
product  of  the  best  quality  at  the  cheapest  rate.  Who- 
ever that  person  is,  and  wherever  he  dwells,  it  is  cheaper 
to  employ  him  than  any  one  else,  and  any  one  who  is 
permitted'  to  own  his  own  property,  will  employ  him. 
Those  who  cannot  compete  with  him  will  employ  them- 
selves in  producing  something  else  which  they  can  pro- 


Il6  ECONOMICS. 

duce  in  the  face  of  competition.  Let  us  suppose  a  case 
which  is  as  clear  as  possible.  Some  man  takes  a  fancy 
to  produce  coffee  in  Minnesota.  No  doubt  by  planting 
trees  in  hot  houses,  and  supplying  the  requisite  tempera- 
ture and  other  atmospheric  conditions,  coffee  might  be 
produced.  When  the  trees  are  grown,  and  have  yielded 
their  first  crop,  the  proprietor  of  this  hot  house  coffee 
plantation  petitions  the  government  for  "  protection  of  our 
home  industry."  He  says  the  competition  of  coffee  grown 
within  the  tropics  is  quite  ruinous  to  me.  Is  competi- 
tion this  man's  enemy?  On  the  contrary  it  seems  to  be 
the  only  teacher  that  can  give  him  wisdom,  and  make 
him  see  the  folly  of  thus  misapplying  capital  and  labor. 
If  he  will  heed  i^s  lessons,  it  will  show  him  the  necessity 
of  employing  himself  in  some  more  rational  fashion.  It 
never  can  be  known  whether  a  given  commodity  can  be 
profitably  produced  in  given  circumstances  of  time  and 
place,  except  by  trying  the  experiment  in  presence  of  free 
competition.  The  competition  which  puts  that  question 
to  the  test  of  a  fair  experiment  is  the  true  friend  of  hu- 
man industry  everywhere.  If  you  would  know  whether 
pig  iron  can  be  made  as  cheaply  in  Pennsylvania  as  in 
Scotland,  try  the  experiment,  and  you  will  know.  You 
never  can  know  in  any  other  way. 

§  86.  The  freest  and  widest  competition  is  the  best 
friend  of  all  industry  in  another  way.  Let  us  suppose 
that  manufactures  have  been  recently  established  in  any 
community,  and  are  yet  in  their  infancy.  In  what  cir- 
cumstances will  those  manufactures  soonest  reach  their 
maturity  and  perfection  ?  Obviously  in  the  presence  and 
under  the  full  stimulus  of  the  most  perfect  manufactures 
of  the  world.  If  the  community  in  which  they  are  situ- 
ated were  isolated  by  natural  barriers  from  all  the  rest  of 
mankind,  the  low  demands  of  the  community  around 
them  would  be  supplied,  and  nothing  more  would  be 


MONOPOLIES.  11'/ 

aimed  at.  There  would  be  little  stimulus  to  improve- 
ment, and  progress  would  be  very  slow.  But  if  they  were 
constantly  in  presence  of  the  most  perfectly  manufactured 
fabrics  of  the  world,  the  best  models  would  be  always  in 
sight  of  their  managers,  and  the  strongest  inducements 
would  stimulate  them  to  bring  every  process  to  the  high- 
est perfection.  If  by  legislation  unfriendly  to  the  impor- 
tation of  manufactured  goods,  you  compel  that  com- 
munity to  accept  their  own  manufactures,  such  as  they 
are,  and  at  such  prices  as  are  demanded  for  them,  the 
inevitable  result  will  be  imperfect  products  at  high  prices. 
The  aim  of  producers  will  be  to  obtain  the  highest  price 
for  the  lowest  cost.  The  effect  of  such  legislative  isola- 
tion will  be  the  same  as  the  effect  of  isolation  by  impass- 
able natural  barriers. 

No  one  will  deny,  that  if  you  would  bring  the  schools, 
the  literature,  the  science,  the  art,  of  any  portion  of  the 
world  to  the  highest  perfection  it  must  be  done  in  direct 
competition  with  all  that  is  noblest  and  most  worthy  of 
imitation  in  the  intellectual  progress  of  the  world.  Hero- 
dotus the  father  of  history,  and  Homer  the  father  of  Epic 
poetry,  were  the  most  cosmopolitan  men  of  antiquity. 
They  made  themselves  acquainted  with  the  knowledge, 
the  wisdom,  the  civilization  of  their  times.  There  is 
every  reason  to  believe,  that  this  is  a  condition  of  all 
progress,  of  all  civilization.  Competition  is  so  far  from 
being  any  man's  enemy,  that  it  is  a  great  common  force 
impelling  the  whole  human  race  toward  perfection.  The 
enemy  against  which  some  men  so  plaintively  implore 
their  country's  protection  is  purely  a  creation  of  their 
own  imagination. 

§  87.  We  have  already  incidentally  remarked,  that 
the  general  principles  of  the  science  are  all  adverse  to  the 
monopoly  of  protection^  and  condemn  and  reject  it  as  an 
intolerable  anomaly.     We  have  already  shown  that  both 


n8  ECONOMICS. 

{abor  and  capital  obey  laws  of  natural  gravitation,  which 
are  irrespective  of  national  boundaries.  They  tend  to- 
ward the  point  of  greatest  demand  as  indicated  by  high- 
est remuneration,  whether  that  point  be  on  one  conti- 
nent or  another,  or  in  the  remote  islands  of  the  ocean. 
Neither  has  exchange  any  natural  relation  to  nationality. 
It  always  seeks  to  buy  at  the  point  of  greatest  cheapness, 
and  to  sell  at  the  point  of  greatest  dearness,  in  whatever 
latitude  or  longitude  those  points  may  be  found.  It  is 
confessedly  one  of  the  grandest  functions  of  any  civilized 
government,  to  protect  its  people  in  pushing  their  ex- 
changes to  the  extreme  limits  of  humanity. 

The  true  economic  theory  is  that  the  human  race  is  one 
family.  The  Christian  scriptures  and  our  science  are  in 
respect  to  this  matter  perfectly  at  one.  "  All  ye  are 
brethren."  The  wealth  of  the  world  is  the  patrimony  of 
this  one  family.  Our  problem  as  economists  is  to  deter- 
mine by  what  laws,  and  under  what  conditions,  this  patri- 
mony can  be  most  increased.  The  true  solution  of  this 
problem  is,  that  every  man  shall  employ  his  labor  in  pro- 
ducing that  which  has  the  greatest  value  possible  to  him, 
exchange  that  value  where  it  is  a  maximum,  and  where 
the  value  which  he  is  to  receive  in  return  is  a  minimum. 
In  this  way  it  needs  no  argument  to  prove  that  every  man 
will  be  richer  than  in  any  other,  and  that  as  the  wealth 
of  a  nation  can  be  nothing  but  the  aggregate  of  the 
wealth  of  its  individual  citizens,  every  nation  will  be 
richest  when  each  of  its  citizens  is  richest.  That  the 
great  laws  of  human  nature  which  are  the  natural  foices 
of  the  science  will,  when  left  to  their  own  freedom  of 
action,  thus  construct  the  economic  system,  is  just  as 
obvious  as  that  universal  gravitation  will  construct  the 
solar  system  as  it  is. 

§  88.  To  all  this  we  often  hear  the  reply  made, — this 
is  very  beautiful  ifi  theory^  but  it  is  mere  theory.     It  will 


FREE   TRADE,    OBJECTIONS    CONSIDERED.  II5 

not  work  in  the  actual  world  that  is.  Friction  is  left  out 
of  the  account.  The  real  world  differs  so  much  from  the 
world  of  conception  as  to  make  the  theory  quite  worth- 
less. We  believe  this  to  be  the  only  answer  which  it  is 
possible  to  make  to  the  arguments  we  have  advanced. 
This  answer,  it  should  be  observed,  neither  sets  aside 
nor  modifies  one  of  those  great  natural  forces  on  which 
we  have  insisted,  nor  pretends  to  deny  that  they  must 
act  in  the  manner  we  have  pointed  out.  It  is  admitted 
then  that  they  exist  and  must  act  as  we  claim.  But  the 
assertion  is,  that  there  are  counteracting  forces,  by  which 
our  results  will  be  essentially  modified,  so  that  our  con- 
clusions will  not  stand  the  test  of  experiment.  The  issue 
has  therefore  been  reduced  to  the  simple  inquiry, — what 
is  the  friction,  what  are  the  counteracting  forces  which 
we  have  failed  to  allow  for  ?  It  is  therefore  incumbent 
on  us  carefully  to  examine  all  suggestions  which  seem 
to  point  out  anything  of  this  character,  and  allow  them 
their  full  weight. 


CHAPTER   VIII. 

Free  Trade,  Objections  Considered. 

§  89.  That  system  of  perfect  freedom  of  exchange 
between  different  portions  of  the  human  family,  irrespec- 
tive of  any  national  lines,  which  was  advocated  in  a  pre- 
vious chapter  is  generally  called  free  trade.  That  term 
we  shall  frequently  have  occasion  to  use  in  much  that 
follows.     We  therefore  propose  the  following, 

Definition,  Free  Trade  is  the  liberty  of  every  man  to 
buy  where  he  can  buy  cheapest  and  sell  where  lie  can  sell 

^^^"^^^^^ 


S20  ECONOMICS. 

dearest,  without  any  obstruction  being  thrown  in  his  way 
by  the  interference  of  government. 

The  advocate  of  the  most  perfect  freedom  of  trade 
is  no  enemy  to  duties  imposed  purely  and  simply  for  the 
purpose  of  raising  revenue  for  the  legitimate  purposes 
of  government.  He  only  protests  against  imposts  which 
are  of  the  nature  of  a  monopoly, —  imposts  levied  for  the 
purpose  of  screening  certain  products  from  the  competi- 
tion of  foreign  producers.  The  general  subject  of  im- 
posts for  revenue  will  be  considered  in  its  proper  place. 
It  was  necessary  to  say  so  much  here  to  guard  against  a 
common  misunderstanding. 

Let  us  then  proceed  to  examine  those  counteracting 
forces,  which  it  is  claimed  set  aside  the  results  to  which 
we  were  conducted  in  the  last  chapter,  by  developing  the 
great  natural  laws  of  the  science.  These  laws  it  is  said 
are  purely  theoretic.  The  friction  of  really  existing 
things  it  is  said  renders  them  useless  in  practice.  What 
then  is  the  friction  ? 

§  90.  First,  It  is  said  that  no  nation  can  "prosper  with- 
out variety  of  industry,  and  that  free  trade  would  limit 
the  labor  of  a  nation  to  the  smallest  number  of  industries, 
and  thus  be  fatal  to  its  prosperity.  This  argument  has 
been  urged,  perhaps  under  every  possible  aspect,  by 
Henry  C.  Carey,  who  is  certainly  the  most  popular,  and 
perhaps  the  ablest  advocate  of  "  Protection  "  in  the  Eng- 
lish language.  It  therefore  deserves  to  be  treated  with 
respect  and  answered  with  candor. 

That  every  great  and  prosperous  nation  may  be  ex- 
pected to  exhibit  a  vast  and  complicated  variety  of  in- 
dustry, will  be  as  cheerfully  and  fully  admitted,  as  any 
advocate  of  Protection  could  desire.  Free  Trade  is  not 
opposed  to  variety  of  industry.  It  would  not  however 
pursue  profitless  industry  for  the  mere  sake  of  variety. 
Accuracy  however   requires  us  to  say   that  while  the 


FREE   TRADE,    OBJECTIONS   CONSIDERED.  12  1 

proposition,  that  a  nation  cannot  prosper  without  variety 
of  industry,  is  generally  true,  its  truth  is  not  universal 
and  absolute.  For  aught  we  know,  it  may  prove  true, 
that  Colorado  has  mineral  wealth  so  abundant  and  so 
permanent,  that  she  may  be  a  prosperous  state  with  a 
single  industry,  and  that  she  might  be  even  if  she  were 
an  independent  nation.  The  natural  wealth  of  a  nation 
may  be  limited  to  a  single  product,  and  yet  that  product 
may  be  so  abundant,  and  so  important  to  all  the  rest  of 
the  world,  that  she  may  rise  to  great  wealth  without  any 
variety  of  industry.  As  a  generalization  therefore  the 
proposition  fails.  It  must  not  be  applied  in  the  argu- 
ment as  a  universal  law.  We  must  look  to  it  that  there 
is  not  something  in  the  peculiar  conditions  of  the  case  to 
render  it  inapplicable. 

In  most  cases  national  prosperity  will  be  indicated 
by  great  variety  of  industry.  But  which  is  cause,  and 
which  effect?  Do  nations  attain  to  great  prosperity  be- 
cause they  have  great  variety  of  industry  ?  Or  does  their 
industry  expand  itself  into  endless  variety,  because  they 
are  very  prosperous?  It  is  very  easy  to  show  that  in 
most  cases  variety  of  industry  is  the  effect  of  prosperity, 
and  not  primarily  its  cause. 

To  the  early  settlers  of  that  region  of  vast  agricultural 
fertility,  the  Upper  Mississippi  Valley,  variety  of  industry 
was  simply  impossible.  Manufactures,  except  the  pro- 
ducts of  the  spinning-wheel  and  the  hand-loom,  were  out 
of  the  question.  The  first  settlers  had  neither  machinery 
nor  materials  and  no  capital  with  which  to  procure  either. 
Money  was  worth  four  or  five  per  cent  a  month,  to  be 
used  in  purchasing  those  lands  of  exhaustless  fertility  at 
a  dollar  and  a  quarter  an  acre,  and  in  preparing  them 
for  a  crop,  by  subduing  the  rank  growths  of  nature  with 
which  they  were  covered.  Mr.  Henry  C.  Carey  himself 
could  hardly  claim  that  manufactures  could  afford  to  pay 
6   . 


122  ECONOMICS. 

those  rates  of  interest.  The  first  settlers  could  do  noth- 
ing but  avail  themselves  of  the  exuberant  fertility  of  the 
soil,  and  send  its  produce  to  the  best  market  to  which 
it  would  bear  to  be  transported,  receiving  in  return  such 
things  as  they  needed.  Had  a  protectionist  of  Mr.  Carey's 
school  gone  on  a  mission  to  those  hardy  pioneers,  to 
preach  to  them  the  gospel  of  variety  of  industry,  he  would 
have  preached  to  very  unappreciative  audiences.  To 
understand  how  protective  duties  on  foreign  manufactures 
could  give  them  variety  of  industry,  would  have  been 
beyond  their  mental  capacity.  They  would  have  been 
able  perhaps  to  understand  that  such  a  duty  would  ren- 
der manufactured  articles  dearer  than  ever,  but  surely 
they  had  always  found  them  quite  dear  enough. 

Yet  prosperity  v/as  not  impossible  to  those  people. 
They  did  prosper  greatly  by  this  single  industry,  and  by 
the  prosperity  of  their  agriculture  came  in  due  time  the 
possibility  and  the  necessity  of  more  varied  industry. 
Accumulated  wealth  must  be  valueless,  or  seek  new 
methods  of  profitable  investment.  Their  industry  be- 
came from  year  to  year  more  various,  because  their 
increasing  wealth  must  find  other  modes  of  investment, 
these  new  investments  would  in  their  turn  become  the 
cause  of  still  greater  prosperity.  But  primarily  they 
were  the  effect,  not  the  cause  of  prosperity. 

If  the  Sioux  Indians  should  discover  in  those  barren 
wilds  over  which  they  roam,  some  tract  of  fertile  land, 
and  determine  to  abandon  the  chase  and  devote  them- 
selves to  the  regular  pursuits  of  civilized  life,  their  in- 
dustry must  at  first  be  purely  agricultural.  They  must 
exchange  with  their  white  neighbors  the  products  of  the 
soil  for  the  products  of  mechanical  skill  which  they  need. 
As  they  prospered,  they  would  be  able  to  cultivate  the 
mechanic  arts  among  themselves.  This  would  make  their 
accumulation  of  wealth  more  rapid.     The  accumulations 


FREE   TRADE,    OBJECTIONS    CONSIDERED.  1 23 

of  successive  generations  would  render  variety  of  industry 
possible  and  necessary.  To  such  a  people  variety  of  in- 
dustry is  as  truly  a  growth,  a  necessary  growth  as  the 
matured  oak  of  the  forest  is  the  result  of  growth  from  the 
acorn.  Such  must  be  the  progress  of  any  people,  from  the 
poverty  of  its  beginnings  to  the  wealth  of  its  maturity. 
Simple  industry  comes  first,  then  as  wealth  increases  vari- 
ous industry  becomes  possible  and  inevitable.  To  insist 
on  variety  of  industry  as  the  primary  cause  of  a  nation's 
prosperity,  is  to  manifest  a  profound  ignorance  of  the  laws 
of  national  growth.  It  is  in  the  strictest  sense  prepos- 
terous. It  is  to  insist  on  the  end  before  the  beginning. 
A  greater  delusion  was  never  imposed  on  a  credulous 
people,  than  to  make  them  believe,  that  by  discouraging 
the  introduction  of  the  products  of  skill  and  machinery 
from  abroad,  which  they  need  now  to  comfort  their  lives 
and  aid  their  toil,  they  can  secure  the  production  of  such 
commodities  at  home,  under  circumstances  more  favor- 
able than  to  procure  them  in  exchange  for  the  products 
of  their  agriculture,  and  that  they  shall  thereby  become 
at  once  a  skillful  manufacturing  people,  with  all  that 
variety  of  industry  w^hich  belongs  to  nations  of  old  civ- 
ilizations and  vast  accumulations  of  wealth.  This  argu- 
ment for  protection  is  certainly  fallacious. 

§  91.  Free  Trade  has  no  tendency  to  retard  the  intro- 
duction of  every  profitable  variety  of  industry.  It  can  not 
be  too  steadily  borne  in  mind,  that  every  man  of  every 
nation  will  increase  his  wealth  most  rapidly  by  buying  of 
him  that  will  sell  cheapest,  and  what  is  for  the  interest 
of  every  man  must  be  for  the  interest  of  a  whole  world. 
If  therefore  any  branch  of  industry  can  be  profitably 
pursued  in  the  face  of  all  natural  competition,  free  trade 
will  be  no  hinderance  to  its  introduction ;  if  it  can  not 
be  profitably  pursued,  free  trade  will  prevent  its  intro- 
duction only  because  the  products  of  that  branch  of  in- 


124  ECONOMICS. 

dustry  can  be  more  cheaply  imported  from  abroad  thar 
made  at  home.  The  mere  fact  that  it  can  not  be  profit- 
ably manufactured  at  home  is  positive  proof  that  men 
in  that  community  can  employ  themselves  more  profitably 
in  producing  something  else  wherewith  to  purchase  that 
particular  product  from  abroad.  Free  trade  therefore  en- 
courages and  invites  to  every  kind  of  enterprise  that  can 
be  prosecuted  with  profit,  but  this  is  not  all  which  it 
accomplishes.  It  saves  a  community  from  wasting 
itself  upon  unprofitable  enterprises.  Variety  of  industry 
is  not  a  good  thing  in  itself,  for  a  community  any  more 
than  for  an  individual.  It  is  only  profitable  industry 
that  enriches.  If  for  the  sake  of  variety  of  industry  an 
individual  engages  in  occupations  in  which  he  cannot 
compete  with  his  neighbors,  he  will  be  impoverished,  not 
enriched.  This  is  as  true  of  communities  as  of  indi- 
viduals. No  man  can  commit  greater  folly  than  to  insist 
on  doing  for  himself  what  another  stands  ready  to  do 
for  him  at  less  cost.  If  a  blacksmith  can  earn  the  mak- 
ing of  two  coats  by  shoeing  horses  while  he  could  make 
one  for  himself,  it  would  be  nothing  but  stupidity  and 
folly  to  leave  shoeing  horses,  to  make  his  own  coat,  when 
he  had  no  reason  for  doing  so  except  that  he  desired  to 
have  a  variety  of  industry.  What  is  folly  in  an  indi- 
vidual is  no  less  folly  in  a  community.  The  whole  truth 
is,  that  every  man  and  every  people  ought  to  have  just 
so  much  variety  of  industry  as  can  be  prosecuted  profit- 
ably. Free  trade  furnishes  the  only  possible  means  of 
determining,  whether  in  given  circumstances  any  branch 
of  industry  is  profitable  or  not. 

§  92.  Second.  //  is  affirmed  that  it  is  impossible  to 
establish  manufactures  in  a  nation  where  they  have  not 
hitherto  existed^  ifi  presence  of  the  competition  of  other  na- 
tions whose  manufactures  are  already  in  their  full  ma- 
turity.    This  objection  very  strikingly  illustrates  a  cei- 


FREE   TRADE,    OBJECTIONS   CONSIDERED.  I25 

tain  confusion  of  thought,  which  is  an  unfailing  charac- 
teristic of  argument  for  protection.  It  is  said  the  interest 
of  foreign, — say  of  English  manufacturers,  is  so  great  in 
having  the  American  market  entirely  to  themselves,  that 
they  will  crush  out  any  manufacturing  enterprises  of  our 
own  by  a  ruinous  competition.  The  confusion  of  thought 
appears  in  mingling  with  the  matter  the  idea  of  nation- 
ality. Grant  that  the  danger  here  referred  to  is  real  and 
to  any  degree  imminent,  it  is  just  as  likely  to  occur  be- 
tween two  different  sections  of  our  own  country,  as  be- 
tween England  and  the  United  States.  Boundary  lines 
of  nations  are  totally  irrelevant  to  the  matter.  The 
manufacturers  of  the  Atlantic  States  are  just  as  likely  to 
crush  out  the  infant  manufactures  of  the  Mississippi 
valley,  as  the  manufacturers  of  England  are  to  crush  out 
those  of  the  United  States.  If  for  this  reason  our  coun- 
try needs  protection  against  English  competition,  the 
Mississippi  valley  still  more  urgently  needs  protection 
against  the  competition  of  the  Eastern  and  Middle  States. 
If  it  is  impossible  to  establish  American  manufactures 
in  face  of  English  competition,  it  is  certainly  not  easier 
to  establish  Western  manufactures  in  face  of  Eastern 
competition. 

This  objection  indicates  no  less  confusion  of  thought 
in  the  conception  which  it  implies  of  the  nature  of  com- 
petition. To  hear  some  men  talk,  one  would  suppose 
the  whole  political  power  of  England  herself  were  to  be 
employed  in  crushing  out  an  incipient  American  man- 
ufacturing enterprise.  By  the  application  of  a  little 
analysis,  we  shall  readily  see  that  it  is  not  the  combined 
force  of  the  English  nation  controlled  by  one  social  per- 
sonality that  is  to  be  apprehended.  It  is  the  competition 
of  thousands  of  English  manufacturers,  with  all  their 
mutual  rivalries.  They  will  compete  with  each  other 
just  as  freely  in  the  markets  of  New  York,  Boston  and 


126  ECONOMICS. 

Philadelphia,  as  they  will  in  those  of  London,  Liverpool 
and  Glasgow.  The  question  is,  whether  all  these  rival 
interests  are  likely  to  be  combined  in  our  markets,  to 
crush  out  an  infant  manufacturing  enterprise  by  selling 
below  cost.  Let  us  suppose  that  our  woolen  manufac- 
tures are  thought  to  be  threatened  with  this  danger. 
The  case  is,  that  under  the  regular  action  of  free  com- 
petition, the  manufacturing  of  woolen  can  be  profitable. 
In  this  state  of  facts  that  branch  of  manufactures  cannot 
be  crushed  out  by  competition,  except  by  supplying  our 
market  with  foreign  woolens  at  less  than  cost.  The 
question  then  is  whether  English  manufacturers  can  and 
will  combine  together  to  supply  50,000,000  of  people 
with  their  products  at  less  than  cost.  This  is  an  exact 
statement  of  the  nature  of  the  danger,  and  enables  us  to 
form  an  exact  estimate  of  its  magnitude. 

The  truth  is  obvious  enough.  The  only  process  by 
which  such  a  destruction  of  our  manufactures  could  even 
be  attempted,  is  one  by  which  English  manufacturers 
would  bring  inevitable  ruin  on  themselves.  In  this  state 
of  the  facts,  and  under  free  trade,  it  must  be  just  as  easy 
to  found  new  establishments  for  the  manufacture  of 
woolen  on  American,  as  on  English  soil.  The  supposed 
danger  is  quite  imaginary,  and  the  necessity  of  protect- 
ing our  infant  manufactures  is  a  shallow  delusion,  which 
a  little  tranquil  thought  would  very  easily  dissipate. 

§  93.  Third.  //  is  said  that  Free  Trade  deprives  the 
land  of  the  manures  which  result  from  the  consumption  of 
its  products. 

This  is  also  a  point  much  insisted  on  by  Mr.  Carey, 
and  the  men  of  his  school.  But  a  careful  examination 
will  show  that  all  the  truth  there  is  in  this  objection,  is 
only  a  verification  of  Solomon's  proverb.  "  The  destruc- 
tion of  the  poor  is  their  poverty."  That  proverb  would 
still  be  true  as  ever,  if  Mr.  Carey  should  succeed  in  ap- 


FREE   TRADE,    OBJECTIONS   CONSIDERED.  12  7 

plying  his  theory  of  protection  to  the  uttermost.  No 
one  acquainted  with  the  subject  will  deny  that,  in  order 
to  preserve  the  productive  power  of  the  soil  unimpaired, 
it  is  necessary  to  restore  to  it  the  offal  which  remains 
after  the  consumption  of  its  products.  The  law  of  rent 
is  founded  in  nature.  The  soil  gives  generously,  but  can 
continue  to  give,  only  on  condition  that  when  man  has 
served  himself  of  her  products,  he  return  to  her  the  un- 
consumed  remnant. 

But  the  possibility  of  doing  this  is  unavoidably  de- 
pendent on  the  various  conditions  under  which  land  is 
cultivated,  and  no  artificial  legislation  can  place  different 
countries,  or  different  portions  of  the  same  country,  in 
circumstances  of  equal  advantage  in  this  respect.  When 
civilized  men  first  sought  a  home  amid  the  mighty  forests 
of  Ohio  and  Indiana,  they  were  under  an  unavoidable 
necessity  of  cutting  down  and  reducing  to  ashes  masses 
of  timber  which,  were  it  now  in  existence,  would  in  many 
instances  be  worth  more  than  the  farms  on  which  it  grew. 
Yet  civilization  could  make  no  beginning  there  without 
that  vast  and  as  it  now  seems  sorrowful  waste.  Even 
after  those  forests  had  been  reduced  to  ashes,  the  ashes 
themselves  could  not  be  utilized.  The  manufacturing  of 
potash  was  not  yet  established  in  those  wilds  so  remote 
from  the  markets  of  the  world.  Even  yet  the  inevitable 
waste  was  by  no  means  at  an  end.  The  product  of  those 
farms  could,  perhaps  for  generations,  find  no  market  ex- 
cept at  distant  cities,  from  which  its  remnants  never 
could  be  returned  to  the  land  on  which  it  grew.  As  to 
fertilizing  those  farms  it  could  make  no  difference,  whether 
it  found  a  market  in  a  North  American,  an  English  or  a 
South  American  city. 

It  has  happened  thus  in  all  parts  of  our  country  by  a 
necessity  inherent  in  the  very  nature  of  the  case.  The 
products  of  the  farm  could  for  a  time  find  consumers 


1^8  ECONOMICS. 

only  at  a  great  distance,  and  could  not  make  the  natural 
return  to  enrich  the  soil  on  which  they  grew.  The  tillers 
of  those  farms  have  not  only  been  under  a  necessity  of 
destroying  the  magnificent  forests  which  were  their  spon- 
taneous products,  and  of  allowing  the  very  ashes  to  which 
those  forests  were  reduced  to  lie  almost  useless  on  the 
ground,  but  of  consuming  for  generations  the  rich  mould 
accumulated  on  their  farms,  by  the  decay  of  the  luxuriant 
vegetation  of  ages,  before  society  could  be  brought  to 
such  a  condition  of  maturity,  as  rendered  practicable  the 
fertilization  necessary  to  restore  the  productive  power  of 
their  exhausted  land. 

It  must  be  admitted  that  this  is  rather  an  inviting 
theme  for  pathetic  declamation,  and  if  any  one  has  a 
taste  for  that  style  of  composition,  he  may  find  an  abund- 
ant supply  of  it  in  the  writings  of  Mr.  Carey's  school  of 
economists.  But  how  it  has  any  real  relation  to  the 
question  under  consideration  is  not  very  apparent.  To 
establish  various  industry  in  the  forests  of  Ohio  and 
Indiana,  create  a  home  market  for  the  products  of  those 
newly  cleared  farms,  utilize  their  magnificent  forests  and 
provide  fertilizers  to  prevent  the  waste  of  the  productive 
power  of  the  soil,  was  as  impossible  as  to  mature  har- 
vests while  those  forests,  with  a  density  of  foliage  which 
sunbeams  seldom  penetrated,  shaded  all  the  ground. 
No  doubt  the  wealth  of  a  country  is  greatly  increased  by 
sowing  it  over  thickly  with  cities  and  villages  and  manu- 
facturing machinery.  But  the  evil  is  quite  independent 
of  the  nationality  with  which  we  trade.  It  results  from 
the  fact  that  the  products  of  the  farm  must  be  consumed 
at  a  distance  from  the  spot  on  which  they  grew,  and  not 
from  their  being  consumed  on  the  other  side  of  a  national 
boundary ;  and  it  admits  of  no  effectual  remedy  so  long 
as  it  remains  true,  that  the  inhabitants  of  a  new  settle- 
ment can  purchase  many  things  from  other  communities 


FREE   TRADE,    OBJECTIONS   CONSIDERED.  1 29 

more  cheaply  than  they  can  make  them  for  themselves. 
It  would  be  far  more  convenient  for  the  infant  and  for 
its  mother,  that  it  should  walk  rather  than  creep;  but  it 
will  still  remain  true,  that  creeping  is  a  necessary  stage 
in  the  process  of  learning  to  walk.  Lectures  delivered 
to  infants  and  their  mothers,  on  the  superiority  of  walk- 
ing to  creeping,  will  not  be  found  to  be  of  much  practical 
utility.  Mothers  will  gladly  admit  the  truth  of  what  you 
say,  but  babies  will  still  creep  before  they  walk.  And  so 
will  communities  in  spite  of  all  the  theoretic  exhortations 
of  Mr.  Carey  and  his  followers. 

§  94.  Fourth.  It  is  asserted  that  free  trade  is  destruc- 
tive of  national  independence. 

We  suspect  that  this  objection  has  more  influence  in 
reconciling  a  great  number  of  minds  to  our  present  pro- 
tective legislation  than  any  or  all  other  arguments.  In 
order  to  deal  with  it  fairly,  we  must  endeavor  justly  to  con- 
ceive what  sort  of  national  independence  that  is  which  is 
practicable  and  desirable.  Every  man  ought  to  be  jeal- 
ous of  his  own  independence.  There  is  a  true  independ- 
ence, the  loss  of  which  is  the  loss  of  manhood,  almost  of 
personality.  It  is  the  right  and  the  habit  of  relying  on 
one's  own  intellect  in  the  formation  of  opinions,  and  of 
governing  his  actions  by  his  own  free  choice.  Such  an 
independence  is  not  at  all  inconsistent  with  the  innu- 
merable dependencies  of  social  life.  It  is  not  necessary  in 
order  to  maintain  it,  that  one  should  keep  himself  in  such 
relations  to  his  fellow  men,  as  to  be  prepared  at  anytime 
to  dispense  with  the  help  of  all  his  fellow-beings,  and  to 
inaugurate  a  state  of  war  between  himself  and  the  rest  of 
the  world,  whenever  he  may  think  it  desirable  or  neces- 
sary. Such  a  notion  of  his  own  independence  would 
unfit  any  man  for  the  society  of  men.  All  true  manhood 
acknowledges  all  these  innumerable  social  dependencies, 
as  cheerfully  as  it  asserts  independence  in  the  only 
6* 


130  ECONOMICS. 

sense  in  which  any  wise  and  good  man  would  be  willing 
to  be  independent. 

The  true  co?tception  of  national  independence  is  in  princi- 
ple precisely  the  same.  It  is  the  conception  of  an  inde- 
pendent social  personality  among  the  nations,  with  full 
right  and  power  and  will  to  exercise  all  the  functions  of 
sovereignty;  but  still  admitting  and  delighting  in  all  the 
innumerable  social  dependencies  which  bind  the  human 
race  together  in  one  great  brotherhood  of  nations. 

§  95.  It  is  asserted,  that  if  we  allow  ourselves  to  be 
dependent  on  the  manufactures  of  any  other  nation^  we  shall 
be  brought  into  great  distress  in  case  of  a  war  with  that 
nation,  for  the  want  of  those  products  for  which  we  have 
been  accustomed  to  depend  on  her  industry.  When  this 
objection  is  urged,  it  is  forgotten  that  all  such  depend- 
ence is  mutual.  If  in  case  of  a  war  with  a  nation  with 
whose  people  we  have  a  large  trade,  we  are  liable  to  be 
distressed  by  the  cutting  off  of  our  accustomed  supplies, 
our  enemies  will  also  be  distressed  by  the  failure  of  sup- 
plies which  they  have  been  accustomed  to  receive  from 
us.  If  for  example  we  are  ever  involved  in  another 
fratricidal  war  with  England,  (and  no  war  between  the 
United  States  and  England  can  be  other  than  fratricidal,) 
it  is  doubtless  true,  that  we  shall  be  put  to  great  incon- 
venience for  the  want  of  what  we  have  been  accustomed 
to  purchase  from  her.  But  let  no  one  suppose  she  would 
be  put  to  no  inconvenience  for  what  she  is  accustomed 
to  receive  in  return  from  us.  On  the  contrary  she  would 
be  very  much  more  distressed  than  we.  We  receive 
from  her,  for  the  most  part,  luxuries,  and  our  manufactur- 
ing industry  could  be  rapidly  quickened  to  supply  the 
deficiency.  She  on  the  contrary  receives  from  us  the 
raw  material  of  her  manufactures,  without  which  her  in- 
dustry must  cease,  and  the  daily  bread  of  millions  of  her 
people.      No  fleets  and  armies  could  distress  England 


FREE   TRADE,    OBJECTIONS   CONSIDERED.  I3I 

as  she  would  be  distressed  by  bringing  the  food  supply 
of  vast  numbers  of  her  people  into  peril.  The  mere  loss 
of  the  United  States  as  a  market  for  her  manufactures 
would  annoy  and  distress  her  more  than  all  our  arma- 
ments. So  far  is  it  from  being  true,  that  our  dependence 
on  the  manufactures  of  England  would  be  a  disadvantage 
to  us  in  case  of  a  war,  that  it  would  give  us  an  immense 
advantage  in  the  conflict.  If  we  must  have  war,  let  it  be 
with  some  nation  that  is  dependent  on  us  for  a  market 
for  the  products  of  her  industry,  and  for  the  food  of  her 
people.  He  who  on  this  ground  objects  to  free  trade 
with  Great  Britain  is  sadly  blinded  to  the  real  interests 
of  his  country. 

§  96.  If  we  take  a  true  view  of  the  nature  of  national 
independence,  and  of  the  mutual  dependence  which  free 
trade  implies  and  promotes,  we  shall  never  cease  to  give 
to  the  doctrines  of  free  trade  our  unqualified  adhesion. 
It  is  the  obvious  design  and  will  of  the  Creator,  that  all 
the  human  race  should  be  bound  together  by  ties  of 
mutual  helpfulness,  and  live  in  perpetual  harmony  with 
each  other.  Nothing  tends  so  powerfully  to  promote 
this,  as  perfect  freedom  of  commercial  intercourse.  Na- 
tions that  are  bound  together  by  ties  of  mutual  depend- 
ence so  strong  as  those  which  unite  England  and  the 
United  States,  especially  so  strong  as  they  would  be  if 
we  on  our  side  adopted  free  trade  as  heartily  and  thor- 
oughly as  England  does  on  hers,  cannot  go  to  war,  they 
must  therefore  do  each  other  justice,  and  by  so  doing 
preserve  the  peace.  Already  in  our  past  history  our 
commercial  relations  have  again  and  again  saved  us  from 
engaging  in  deadly  strife.  It  is  devoutly  to  be  wished, 
that  all  remaining  barriers  to  perfect  freedom  of  com- 
mercial interchange  may  soon  be  removed,  and  that  thus 
the  peace  of  these  two  great  free  nations  may  be  secured 
for  all  the  future. 


132  ECONOMICS. 

Every  philanthropist  looks  forward  with  longing  hope 
to  a  good  time  coming,  when  men  shall  "  beat  their 
swords  into  plowshares  and  their  spears  into  pruning- 
hooks,  and  learn  war  no  more."  One  of  the  most  in- 
dispensable and  hopeful  conditions  of  the  realization  of 
such  an  order  of  things,  is  the  establishment  of  perfect 
freedom  of  trade  among  the  men  of  all  nations.  The 
selfish  national  pride  which  scorns  that  universal  natural 
dependence  of  man  on  man,  that  mutual  helpfulness 
whereby  the  products  of  every  soil  and  climate  and  civ- 
ilization shall  be  exchanged  for  those  of  every  other,  so 
that  all  men  may  enjoy  all  the  bounties  of  the  Creator, — 
that  selfish  malignant  pride  and  false  conception  of  na- 
tional independence,  must  be  banished  from  the  minds  of 
men,  and  the  sentiment  of  fraternity  must  succeed. 

§  97.  Fifth.  It  is  said  thsit  free  trade  might  be  a  very 
good  things  if  other  nations  would  agree  to  it ;  but  that 
while  the  rest  of  the  world  to  a  gi'eat  extent  adheres  to  pro- 
tection^ it  is  necessary  for  us  to  do  the  same. 

If  this  is  the  view  taken,  it  is  surely  incumbent  on  us 
to  accept  free  trade  in  our  relations  to  any  nation  that 
adopts  a  free  trade  policy  towards  ourselves.  If  this  is 
conceded,  then  we  may  at  least  have  free  trade  with 
Britain,  for  her  policy  towards  us  is  as  free  as  could  pos- 
sibly be  asked.  The  way  is  then  open  for  perfect  free- 
dom of  commercial  intercourse  with  England  and  all  her 
colonies,  and  our  government  ought  to  lose  no  time  in 
consummating  a  league  of  commercial  freedom  with  the 
whole  English-speaking  world.  The  uniting  of  all  the 
populations  of  the  earth  that  use  the  English  language, 
in  such  a  league,  would  be  an  event  of  great  and  benefi- 
cent significancy  to  all  mankind. 

But  this  objection  is  capable  of  a  much  more  com- 
prehensive answer.  The  fact  that  the  commercial  policy 
of  any  nation  is  restrictive  and  exclusive,  is  no  reason  at 


FREE   TRADE,    OBJECTIONS   CONSIDERED.  1 33 

all  why  we  should  not  buy  from  the  people  of  that  nation 
anything  which  we  can  procure  from  them  more  cheaply 
than  we  can  produce  it  ourselves,  or  obtain  it  elsewhere. 
The  obvious  rule  of  economy — buy  where  you  can  buy 
cheapest— is  entitled  to  cut  its  way  through  all  national 
rivalries,  jealousies  and  antipathies.  Some  nation  may, 
by  partial  and  ruinous  laws,  exclude  from  her  markets 
what  we  have  to  exchange  with  her  people.  Such  laws 
may  operate  to  produce  exclusion  of  commercial  inter- 
course. We  may  be  in  such  circumstances  that  we  cannot 
profitably  buy  of  her  people  unless  we  can  give  our  own 
products  in  exchange.  In  that  case  commercial  inter- 
course must  be  at  an  end.  She  has  thrown  barriers  in 
our  way  which  we  cannot  surmount.  But  in  such  a  case, 
it  would  be  quite  unnecessary  and  useless  for  us  to  re- 
taliate, by  imposing  discriminating  duties  against  the 
products  of  her  industry.  She  has  herself  excluded  them 
from  our  markets.  If  my  next  door  neighbor  has  built  a 
solid  stone  wall  five  feet  thick  and  ten  feet  high,  to  ex- 
clude me  from  his  premises,  that  wall  is  perfectly  suffi- 
cient to  prevent  any  intercourse  between  us.  It  would 
be  great  stupidity  and  folly  for  me  to  build  another  sim- 
ilar wall  by  the  side  of  his,  for  the  purpose  of  retaliation. 
It  may  however  be  that  the  products  which  she  ex- 
cludes we  can  exchange  elsewhere  for  something  which 
she  will  admit,  perhaps  for  gold,  which  no  nation  rejects. 
It  may  therefore  still  be  true,  that  in  spite  of  her  ex- 
clusiveness,  we  can  obtain  from  her  certain  needed  com- 
modities more  cheaply  than  we  can  obtain  them  else- 
where. In  that  case  the  impolitic  exclusiveness  of  her 
legislation  is  no  reason  at  all  why  we  should  not  avail 
ourselves  of  the  advantage  of  buying  of  those  that  will 
sell  cheapest.  If  therefore  her  people  are  disposed  to 
offer  in  our  markets  commodities  which  we  need,  more 
cheaply  than  any  one  else  will  sell  them,  why  should  we. 


134  ECONOMICS. 

in  mere  retaliation  for  her  suicidal  exclusiveness,  refuse 
to  purchase  ?  To  do  so  is  childish  and  unreasoning  folly. 
If  I  raise  cattle  and  my  neighbor  raises  horses,  it  is  very 
childish  in  me  to  refuse  to  buy  of  him  a  horse  which  he 
offers  me  at  a  bargain,  because  he  refuses  to  buy  my  cat- 
tle when  he  needs  them,  and  I  offer  them  to  him  on  ad- 
vantageous terms.  Revenge  is  by  many  considered  very 
sweet,  but  it  has  no  commercial  value.  It  is  no  wiser 
between  nations  than  between  individuals.  In  either 
case  it  is  unwise,  mean  and  degrading.  If  we  have  not 
some  better  reason  for  retaining  our  policy  of  exclusive- 
ness  than  national  retaliation,  it  were  wise  to  abandon 
it  with  as  little  delay  as  possible. 

§  98.  Jt  is  alleged^  that  protection  is  necessary,  to  en- 
courage the  acquisition  of  skill  in  manufactures. 

It  is  inconceivable  that  such  a  provision  can  be  neces- 
sary, when  we  remember  that  wages  are  higher,  as  a  gen- 
eral rule,  in  our  country  than  in  any  country  of  Europe, 
and  that  our  country  steadily  receives  a  vast  emigration 
from  those  countries  with  whose  manufacturing  skill  we 
have  chiefly  to  compete.  There  can  be  no  difficulty 
under  these  circumstances  in  attracting  to  this  country 
by  the  offer  of  American  wages  any  number  of  skilled 
laborers  we  may  need.  The  notion  that  in  a  case  like 
this  it  can  be  necessary  to  impose  on  all  manufactured 
goods  duties  varying  from  twenty  per  cent  to  more  than 
a  hundred  per  cent  of  their  value,  for  the  encouragement 
of  manufacturing  skill,  is  in  the  last  degree  absurd,  and 
indicates  that  he  who  urges  it,  draws  much  more  from 
the  resources  of  his  imagination,  than  of  clear  practical 
thought. 

Protection  does  not  encourage  hut  discourages  the  acquisi- 
tion of  manufacturing  skill.  Such  skill  is  the  child  of 
free,  sharp,  practical  competition.  If  American  manu- 
facturers are  to  be  as  skillful  as  those  of  any  other  nation 


OBJECTIONS    TO    PROTECTION    CONSIDERED.  I35 

the}  are  to  become  so,  by  standing  face  to  face  with  the 
most  perfect  manufactures  of  the  world,  and  competing 
with  them  with  no  shield  between.  If  a  protective  duty 
is  interposed,  it  will  relieve  our  manufacturers  from  the 
necessity  of  equalling  the  best  foreign  products,  and 
thereby  render  the  acquisition  of  the  highest  skill  un- 
necessary to  their  success.  To  encourage  manufacturing 
skill  by  such  protection,  is  like  encouraging  industry  by 
relieving  men  from  the  necessity  of  labor  for  the  sup- 
port of  themselves  and  their  families — a  method  which 
we  believe  has  never  been  found  to  be  very  successful. 


CHAPTER   IX. 

Objections  to  Protection  Considered. 

§  99.  In  the  last  chapter  the  objections  which  have 
been  urged  against  free  trade  by  its  leading  opponents 
were  carefully  examined.  In  the  present  chapter  we 
shall  present  a  few  considerations  which  seem  to  us  quite 
fatal  to  the  whole  scheme  of  protection.  //  is  the  aim  oj 
that  system  to  screen  certai7i  branches  of  industry  from  the 
competition  of  like  industries  in  other  countries.  The  means 
are  entirely  inadequate  to  the  end.  No  police  force  which 
such  a  nation  as  ours  can  employ,  can  suffice  to  enforce 
our  present  revenue  system,  along  ten  thousand  miles  of 
sea  coast,  and  three  thousand  miles  of  inland  boundary. 
Where  (as  is  to  a  great  extent  true  under  our  protective 
system)  the  duty  sustains  a  large  ratio  to  the  price  at 
which  the  commodity  is  customarily  sold,  the  temptation 
to  smuggling  is  exceedingly  strong.  It  might  be  antici- 
pated beforehand,  that  in  such  a  country  as  ours,  it  could 


136  ECONOMICS. 

not  be  prevented  against  so  strong  a  motive,  and  experi- 
ence demonstrates  that  it  cannot.  The  difficulty  grows 
largely  out  of  the  fact,  that  the  consciences  of  the 
people  are  never  with  such  restrictive  laws,-^not  even 
the  consciences  of  those  who  make  and  advocate  them. 
There  are  few  who  would  not  evade  and  violate  them 
when  they  could  do  so  without  any  risk  of  incurring  the 
penalty.  Such  laws  can  only  be  enforced  by  an  omni- 
present and  ever  vigilant  police  force — such  a  police  force 
as  along  the  whole  border  of  our  country  is  impossible. 
Consequently  the  branches  of  industry  to  be  protected 
are  not  shielded  from  competition  as  the  government  has 
undertaken  to  shield  them,  and  men  who  have  imported 
goods  under  the  law,  and  honestly  paid  the  duties,  are 
greatly  injured  by  the  competition  of  those  who  obtain 
foreign  goods  without  paying  any  duty  at  all.  Those 
well  acquainted  with  the  commercial  intercourse  between 
the  United  States  and  Canada  know  the  truth  of  what 
we  affirm. 

Such  a  state  of  facts  is  very  injurious  to  public  viorals. 
All  laws  which  are  unsustained  by  individual  conscience 
are  morally  injurious.  They  tend  to  impair  the  force  of 
law  as  a  rule  of  action.  There  are  thousands  who  will 
resort  to  expedients  for  evading  our  revenue  laws,  who 
would  never  do  a  thing  which  was  in  itself  contrary  to 
their  sense  of  honor  and  right.  To  evade  the  law  comes 
to  be  regarded  as  a  very  venial  sin,  or  no  sin  at  all.  No 
government  on  earth  can  afford  to  forbid  what  no  one 
would  have  regarded  as  wrong  had  it  not  been  forbidden, 
and  to  enforce  the  prohibition.  Such  legislation  on  any 
subject  weakens  the  hold  of  the  government  on  the  con- 
sciences of  the  people.  When  the  great  body  of  the  people 
in  their  own  individual  capacity  can  be  thoroughly  con- 
vinced, that  it  is  dishonorable  to  buy  a  foreign  product 
in  preference  to  a  domestic  one  simply  because  it  is 


OBJECTION    TO    PROTECTION    CONSIDERED.  I37 

cheaper,  the  protective  system  may  be  enforced  without 
difficulty,  and  with  perfect  safety  to  public  morals.  But 
so  long  as  no  man  sees  any  dishonor  in  preferring  the  for- 
eign to  the  domestic  commodity  because  of  its  cheapness, 
the  enforcement  of  such  laws  will  be  often  impossible, 
and  always  difficult  and  of  evil  moral  tendency. 

§  100.  The  protective  system  tends  to  construct  the  whole 
economic  fabric  upon  a  wrong  principle  and  to  give  it  a 
wrong  direction.  By  a  code  of  laws  which  permeates  and 
pervades  all  the  economic  machinery  of  society,  the  gov- 
ernment treats  competition  as  a  public  enemy,  and  pro- 
vides for  shielding  from  its  influence  branches  of  industry 
in  which  capital  is  invested  to  the  amount  of  hundreds  of 
millions.  By  this  means  not  only  are  all  those  who  en- 
gaged in  the  protected  branches  of  industry  taught  to  re- 
gard competition  as  thefr  natural  enemy,  and  to  look  to 
the  government  more  and  more  to  shield  them  from  it ; 
but  other  men,  whose  trade  lies  not  within  the  charmed 
circle,  come  to  regard  competition  as  their  enemy  also, 
and  become  painfully  conscious  how  inconvenient  it  is  to 
them,  and  even  though  they  have  no  prospect  of  legislative 
protection,  they  begin  to  look  anxiously  around  for  some 
device  by  which  they  also  may  escape  annoyance  from  the 
common  enemy.  A  nation  whose  legislation  is  strongly 
protective  in  its  character  will  always  be  full  of  innumer- 
able and  endlessly  varied  combinations  of  producers, 
whereby  they  seek  to  fix  their  own  prices  on  their  pro- 
ducts, without  the  necessity  of  being  controlled  by  com- 
petition. 

England  has  for  ages  sustained  by  her  legislation  and 
handed  down  from  generation  to  generation  the  privileges 
which  distinguish  her  aristocracy  from  the  mass  of  her 
people.  Her  laws  have  divided  society  into  two  ranks 
only.  But  custom  has  taken  the  idea  from  the  law,  and 
constructed   many  other  grades  as  distinct  as  the  one 


138  ECONOMICS. 

which  her  laws  originated.  For  many  centuries  every- 
thing in  that  country  has  been  graded.  By  a  ver}  anal- 
ogous process,  all  American  trade  is  at  present  seeking 
to  secure  for  itself  the  privileges  enjoyed  by  the  pro- 
tected industries,  and  presents  the  aspect  of  a  general 
struggle  so  to  constitute  all  its  arrangements  as  to  escape 
the  natural  and  healthful  influence  of  competition.  This 
is  at  present  among  the  chief  obstacles  to  the  growth  of 
our  manufactures,  and  the  expansion  of  our  industry  into 
all  that  rich  variety  which  our  soil  and  climate  admit. 

§  10 1.  Protection  corrupts  our  national  legislation. 
Does  any  one  believe  that  our  present  tariff  of  duties  is 
the  result  of  calm  enlightened  statesmanship,  apphed 
with  judicial  impartiality  to  all  the  interests  affected  by 
it?  Is  it  the  result  of  any  statesmanship  at  all?  He 
who  thinks  so,  is  the  victim  of  a  good  natured  credulity, 
which  is  more  worthy  of  the  prattling  innocency  of  child- 
hood, than  of  the  sober  good  sense  of  mature  manhood. 
It  is  just  such  a  set  of  laws  as  no  man  living  would 
make,  if  it  were  submitted  to  his  judgment  to  decide 
what  laws  are  desirable  and  wise.  It  is  a  clumsy  patch- 
work, which  has  resulted  from  a  compromise  between 
the  conflicting  demands  and  confused  clamors  of  all  the 
great  branches  of  our  industry  that  encounter  any  foreign 
competition,  besieging  and  begging  Congress  for  more 
protection  —  more  protection.  The  question  with  our 
legislators  is,  not  whose  claims  are  really  strongest  and 
most  righteous,  but  whose  clamors  are  loudest,  who  can 
bring  most  votes  to  support  our  party,  or  if  disobliged 
alienate  most  votes  from  it.  The  bearing  of  the  tariff 
on  the  next  election  has  had  a  great  deal  more  influence 
than  its  bearing  on  the  prosperity  of  our  people.  That 
with  resources  such  as  ours,  and  a  national  debt  of  more 
than  $2,000,000,000  to  provide  for,  our  revenue  system 
should  be  constructed  and  controlled  by  such  influences 


OBJECTION   TO   PROTECTION   CONSIDERED.  1 39 

as  these,  is  a  humiliation  of  our  country  in  the  eyes  of 
the  nations.  It  is  disgraceful  to  our  civilization.  To 
this  humiliation  however  must  we  submit,  till  we  throw 
off  this  nightmare  of  protection.  It  must  also  be  added 
to  all  this,  that  in  this  combination  of  evil  influences, 
direct  bribery  of  the  legislator  to  procure  his  vote  in  favor 
of  the  further  protection  of  some  particular  industry,  is 
we  fear  no  uncommon  element. 

§  102.  The  protective  system  is  in  its  own  proper  nature 
unsocial.  It  tends  to  reduce  the  intercourse  of  nations 
to  a  minimum,  and  proportionally  to  weaken  all  the  ties 
of  brotherhood  which  naturally  bind  the  human  family 
together.  Such  a  tendency  in  such  a  country  as  ours  is 
full  of  danger.  Our  safety  requires  that  all  the  forces 
which  tend  to  national  unity  be  strengthened,  and  that 
all  divisive  forces  be  as  far  as  possible  eliminated.  Pro- 
tection is  a  divisive  force.  With  the  exception  of  slavery, 
nothing  has  ever  exposed  our  national  unity  to  so  much 
peril  as  the  attempt  to  carry  into  effect  the  protective 
system.  Any  one  who  will  candidly  consider  the  sub- 
ject will,  we  rnink,  acknowledge  that  our  efforts  at  pro- 
tective legislation,  strangely  persisted  in,  had  great  in- 
fluence in  producing  those  violent  antipathies  which 
were  ultimately  developed  into  the  great  rebellion. 

Nor  are  we  safe  for  the  future.  If  the  doctrines  of 
protection  are  to  be  accepted  as  true,  there  are  no  two 
portions  of  the  earth  between  which  there  are  stronger 
inducements  (o  apply  them,  than  the  New  England  and 
Middle  States  on  the  one  hand,  and  the  great  States  of 
the  Upper  Mississippi  Valley  on  the  other.  The  man- 
ufactures of  the  Northwest  are  powerfully  repressed  by 
the  competition  of  those  of  the  New  England  and  Middle 
States,  and  the  agriculture  of  the  latter  has  been  greatly 
depressed,  in  large  districts  annihilated,  by  the  competi- 
tion  of  that  of  the  Northwest.     If  protection  is  the  true 


140  ECONOMICS. 

and  proper  remedy  for  such  difficulties,  then  should  the 
Alleghanies  be  a  dividing  line  of  nations.  If  men  be- 
come generally  convinced  that  the  doctrines  of  protection 
are  true,  and  would  relieve  New  England  agriculture  from 
its  great  depression,  and  speedily  give  to  the  Mississippi 
Valley  "  variety  of  industry,"  the  Alleghanies  will  become 
a  boundary  of  nations,  and  no  man  can  predict  into  how 
many  rival  nationalities  the  territory  of  the  present 
American  Union  may  ere  long  be  divided. 

§  103.  The  protective  system  as  it  exists  in  our  country 
is  self-contradictory  and  self-destructive.  No  one  will  deny 
that  it  is  possible,  that  a  single  branch  of  industry  might 
be  encouraged  and  stimulated  into  more  rapid  growth 
by  the  monopoly  of  protection.  Let  us  suppose  that  up 
to  a  certain  time  free  trade  had  prevailed,  when  persons 
interested  in  establishing  some  new  industry  had  found 
foreign  competition  inconvenient,  and  applied  to  the  gov- 
ernment for  a  protective  duty.  The  government  grants 
the  request  and  the  revenue  law  is  modified  accordingly. 
The  petitioners  go  away  for  the  present  satisfied.  Let 
us  suppose  that  these  petitioners  were  manufacturers  of 
woolen  cloth.  The  woolgrowers  are  not  slow  to  discover 
that  on  the  one  hand  they  are  obliged  to  pay  more  for 
woolen  cloths,  while  on  the  other  hand  they  are  severely 
pressed  by  the  competition  of  foreign  grown  wool.  They 
apply  for  protection,  and  it  cannot  be  refused.  This 
takes  away  a  part  of  the  value  of  the  privilege  conceded 
to  the  manufacturers  of  wool,  and  they  are  discontented. 

The  principle  of  protection  is  now  established,  and 
every  industry  which  encounters  any  foreign  competition 
will  demand  and  cannot  be  denied  a  share  in  it.  The 
iron  men  of  every  grade  must  be  protected,  and  every 
dime  of  protection  which  is  granted  to  them  increases 
the  price  of  machinery  for  the  manufacture  of  woolens, 
and  thus  damages  the  woolen  interest.     The  cotton  men 


OBJECTION    TO    PROTECTION    CONSIDERED.  I4I 

too  must  be  beard.  They  have  to  pay  higher  wages  to 
their  laborers  because  the  cost  of  living  has  been  in- 
creased. Workmen  in  this  climate  must  have  woolen 
cloth.  The  cost  of  machinery  is  increased  and  therefore 
it  costs  more  to  manufacture  cotton  goods.  They  too 
must  be  protected.  Soon  the  woolen  interest  has  lost 
more  by  monopolies  granted  to  other  industries  than  it 
gained  by  the  one  originally  granted  to  itself,  and  it 
besieges  the  government  more  clamorously  than  ever  for 
more  protection,  and  with  a  much  more  powerful  argu- 
ment. It  now  wants  to  be  protected,  not  so  much  against 
foreign  competition,  as  against  the  monopolies  granted 
to  other  industries.  These  one  and  all  are  soon  again 
thronging  the  lobbies  of  Congress,  demanding  more  pro- 
tection. The  privilege  granted  to  one  industry  is  de- 
structive of  that  granted  to  every  other,  and  no  man  can 
tell  to-day,  whether  his  particular  industry  is  on  the 
whole  benefited  or  injured  by  the  protection  which 
actually  exists,  or  whether  if  the  whole  were  at  once  swept 
away,  his  interest  would  not  be  actually  relieved  of  an 
oppressive  burden.  But  all  still  worship  with  unfaltering 
faith  at  the  shrine  of  exclusiveness,  and  clamor  for  more 
protection,  as  the  panacea  for  all  their  ills.  The  coal 
interest  must  have  protection,  however  much  that  may 
injure  the  iron  interest,  and  the  iron  interest  must  have 
protection,  however  that  may  affect  the  woolen  and  the 
cotton  interests.  If  protectionists  could  demonstrate 
some  great  law  of  nature,  by  which  it  might  be  deter- 
mined with  accuracy  when  and  to  what  amount  protec- 
tion should  be  granted,  the  whole  thing  might  be  reduced 
to  order  and  law  and  reason.  But  till  that  can  be  done, 
(and  it  never  can  be  done),  it  will  present  a  scene  of 
wild  confusion,  self-contradiction  and  self-destruction. 

It  is  impossible   to  escape  this  conclusion,  except  by 
denying  that  protection  does  raise  the  price  of  protected 


142  ECONOMICS. 

products.  Upon  such  a  denial  protectionists  do  often 
venture.  It  is  a  sufficient  proof  that  such  denial  is  futile 
and  absurd,  that  if  the  protecting  duty  does  not  raise 
the  price  of  the  protected  commodities,  it  can  in  no  man- 
ner protect  against  foreign  competition.  It  can  have 
this  effect  only  by  enabling  the  home  producer  to  demand 
a  higher  price  for  his  commodities  than  he  could  com- 
mand in  face  of  the  free  competition  of  foreign  products. 
This  is  the  only  beneficial  influence  which  it  can  exert  on 
the  home  producer.  But  we  are  able  to  produce  on  this 
point  the  sterner  evidence  of  facts.  We  are  furnished 
the  following  figures  on  the  authority  of  a  merchant  of 
the  highest  intelligence,  the  foreman  in  the  carpet  room 
in  one  of  the  largest  commercial  houses  in  the  city  of 
New  York.  The  following  are  the  items  of  the  cost  of  a 
five-frame  Brussels  carpet  per  yard,  in  gold,  of  English 
manufacture,  in  the  city  of  New  York,  viz. 

Cost  in  England 89  cents. 

Duty 64      " 

Exchange,  freight,  etc 22      ** 

Total  cost  in  New  York $1,75 

A  carpet  of  American  manufacture  of  the  same  qual- 
ity is  sold  by  the  New  York  dealer  at  the  same  price 
with  this  English  made  carpet.  Does  then  the  protec- 
tionist expect  us  to  believe  that  the  American  dealer 
could  sell  his  English  carpet  at  the  same  price  as  now,  if 
he  were  relieved  from  the  necessity  of  paying  that  duty 
of  sixty-four  cents  per  yard  t  Or  that  the  American 
manufacturer  could  obtain  the  same  price  for  his  goods 
as  now,  if  English  carpets  could  be  introduced  into  the 
market  free  of  duty,  or  by  paying  only  a  revenue  duty  of 
ten  or  fifteen  per  cent  on  the  cost  in  England  ?  It  re- 
quires some  courage  to  assert  in  view  of  such  figures  that 
a  protective  duty  does  not  enhance  price.  It  would  be 
easy  to  procure  similar  figures  in  respect  to  many  other 
products   which  are  highly  protected.      How  long  our 


OBJECTION   TO   PROTECTION    CONSIDERED.  143 

present  protective  system  is  to  be  adhered  to  against 
such  facts  as  these  we  are  quite  unable  to  predict. 

§  104.  One  point  more  demands  our  attention  before 
we  dismiss  this  subject.  Mr.  Fawcett,  after  having  very 
clearly  demonstrated  free  trade  as  the  natural  law  of  ex- 
change between  men  of  different  nationalities,  looks 
around  for  some  consideration  by  which  to  commend 
charity  in  our  judgment  of  those  who  so  stoutly  resist  its 
introduction  into  the  legislation  of  the  nations.  In  this 
line  of  thought  he  comes  to  the  conclusion,  that  though 
free  trade  is  certainly  for  the  greatest  good  of  the  whole, 
yet  there  are  certain  classes  that  are  benefited  by  an  ex- 
clusive system.  We  can  not  accept  this  conclusion.  It 
may  indeed  be  true  that  when  the  exclusive  system  has 
been  long  established,  and  trade  has  adjusted  itself  to 
it,  there  may  be  classes  who  would  suffer  by  a  return  to 
the  natural  and  healthful  system  of  free  trade.  It  is  sel- 
dom possible  to  right  a  great  wrong  without  hurting 
somebody.  When  the  wrong  was  introduced  many  were 
most  seriously  and  unnecessarily  injured.  During  its 
existence,  it  is  quite  probable  that  persons  may  have  so 
identified  themselves  with  it,  that  their  interests  will  suffer 
when  it  is  removed.  It  is  generally  much  better  that 
such  persons  should  suffer,  than  that  a  great  wrong 
should  not  be  righted.  But  we  deny  that  any  class  can 
be  permanently  injured  by  substituting  free  trade  for  the  mo- 
nopoly of  protection.  It  would  at  first  view  seem,  that  the 
repeal  of  the  English  Corn  Laws  must  have  reduced  the 
price  of  agricultural  products,  and  therefore  been  injuri- 
ous to  land-owners.  And  it  is  true  that  free  trade  has 
kept  the  price  of  wheat  from  rising  while  the  population 
of  the  country  has  been  immensely  increased.  But 
though  the  price  of  wheat  has  not  advanced  with  that  in-» 
crease  of  population,  rents  have  advanced.  A  smaller 
portion  of  the  bread  pf  the  English  people  is  grown  on 
their  own  soil,  but  a  much  greater  breadth  of  land  is 


144  ECONOMICS. 

demanded  for  other  products  which  cannot  be  brought 
from  a  distance,  and  which  pay  a  higher  rent  than  wheat 
can  afford.  The  agricultural  interest  of  England  has 
not  been  injured  by  the  repeal  of  the  Corn  Laws.  Conse- 
quent upon  that  great  measure  of  British  statesmanship, 
England  has  experienced  an  addition  of  one-fifth  to  her 
population,  a  vast  enlargement  in  every  department  of 
her  trade,  and  a  vast  accession  to  her  wealth  unprece- 
dented in  any  other  portion  of  her  history.  In  that 
increased  prosperity  her  agriculture  has  shared.  Facts 
prove  that  the  selfish  exclusiveness  by  which  she  sought 
to  foster  her  agriculture  was  as  unwise  and  suicidal  as 
it  was  selfish  and  exclusive.  Such  must  be  the  effect 
of  free  trade  in  every  case.  Every  one's  true  interest 
lies,  not  in  compelling  his  neighbor  to  receive  from  him 
what  he  could  buy  elsewhere  more  cheaply,  but  in  pro- 
ducing that  for  the  production  of  which  he  possesses 
greater  advantages  than  any  other  producer.  The  high- 
est prosperity  of  a  nation  and  of  every  body  in  it,  of  the 
world  and  all  that  dwell  therein,  requires  that  every  man 
should  be  diligently  seeking  to  produce  more  cheaply 
than  any  one  else  can,  something  which  is  desired  by  the 
greatest  possible  number  of  consumers.  In  this  direc- 
tion free  trade  turns  universal  effort.  Protection  turns 
the  effort  of  every  man  into  the  direction  of  compelling 
as  many  as  possible  to  purchase  his  products  whether 
for  their  interests  or  not.  The  former  tends  to  universal 
honest  thrift,  the  latter  to  equally  universal  dishonest 
sham.  No  fair-minded  man,  after  carefully  examining 
this  subject  in  all  its  bearings  will  doubt,  that  the  aban- 
donment, speedy  and  entire,  of  that  system  of  legislation 
called  protection,  and  the  adoption  of  free  trade  in  all 
our  relations  with  the  rest  of  the  world*  would  procure 
for  our  country  as  great  an  increase  of  prosperity  in  every 
department  of  our  industry,  as  England  has  experienced 
as  the  result  of  adopting  a  similar  policy. 


PART   III 


DISTRIBUTION. 


CHAPTER   I. 

Preliminary  Principles, 

§  io6.  There  seems  at  first  thought  to  be  room  for 
a  doubt,  whether  the  two  parts  of  our  science  which  we 
have  distinguished  as  Exchange  and  Distribution  are 
really  separated  from  each  other  by  any  clearly  definable 
boundary.  The  one  law  of  competition  is  alike  universal 
and  equally  controlling  in  them  both.  It  will  be  shown 
as  we  proceed  that  we  can  no  more  escape  from  it  in 
dealing  with  the  questions  which  Distribution  presents, 
than  with  the  questions  of  simple  Exchange.  A  little 
reflection  will  however  convince  us,  that  they  are  sepa- 
rated by  a  distinct  natural  boundary,  which  ought  not  to 
be  lost  sight  of.  In  treating  of  Exchange,  we  have  been 
considering  the  nature  of  value,  the  laws  which  regulate 
the  exchange  of  one  commodity  for  another,  and  the  in- 
strument by  which  exchanges  are  facilitated.  The  dis- 
cussion of  these  subjects  is  complete  in  itself,  and  may 
be  pursued  to  exhaustion,  without  involving  any  of  the 
applications  of  the  law  of  competition  which  remain  yet 
to  be  considered.  The  question  for  how  much  a  given 
commodity  will  be  exchanged  in  the  market  may  be  de- 
7 


146  ECONOMICS. 

cided  without  involving  any  consideration  of  the  methods 
by  which  its  equivalent  when  received  is  to  be  divided 
among  all  the  interests  which  were  concerned  in  produc- 
ing it.  The  former  of  these  questions  belongs  to  Ex- 
change, the  latter  to  Distribution.  Ihere  are  very  few 
commodities  which  are  the  exclusive  product  of  a  single 
laborer.  Even  if  some  products  seem  at  first  thought 
to  be  so,  a  little  consideration  will  generally  show  us 
that  they  are  not.  The  laborer  who  seems  to  be  alone 
concerned  in  it  used  tools,  and  those  tools  were  produced 
by  labor  previously  exerted.  He  was  fed  and  clothed 
while  he  was  engaged  in  the  work.  That  also  implied 
preexerted  labor.  The  material  on  which  he  wrought 
had  value  when  it  came  to  his  hand.  When  we  pur- 
chase the  product  from  the  laborer  who  made  it  ready 
for  our  use,  we  must  compensate  him,  not  only  for  his 
immediate  labor  bestowed  upon  it,  but  for  all  this  pre- 
exerted labor.  Nor  is  even  this  all.  He  has  paid  and 
we  must  repay  him  for  the  rent  of  the  land  on  which 
grew  his  food  and  the  material  of  his  clothing  consumed 
while  employed  in  that  labor,  and  for  the  use  of  the  cap- 
ital and  for  the  oversight  and  labor  concerned  in  its  pro- 
duction. We  cannot  buy  a  pin  or  a  button  into  the  pro- 
duction of  which  all  these  things  and  many  more  have 
not  entered.  It  may  be  that  so  small  an  article  as  a  pin 
may  have  laid  under  contribution  not  only  many  trades 
and  industries,  but  the  remote  continents  and  islands  of 
the  earth.  All  must  be  adjusted,  each  must  have  its 
share.  To  determine  on  what  principles  and  by  what 
laws  this  division  is  accomplished  is  the  aim  of  this  part 
of  our  science. 

Definition.  Distribution  is  that  part  of  Economia 
which  explains  the  laws  which  prevail  in  assif^ning  to  each 
cf  the  parties  concerned  in  production  their  respective  shares 
in  the  result. 


PRELIMINARY    PRINCIPLES.  I47 

Great  confusion  and  error  in  dealing  with  this  class 
of  subjects  are  constantly  occasioned  by  not  bearing  in 
mind,  that  the  questions  with  which  we  have  to  do  are  not 
ethical^  but  purely  economic.  The  laws  which  determine 
Ihe  several  results  are  not  moral,  but  natural  laws,  as  far 
removed  from  the  control  of  human  wills  as  cohesion  or 
electricity.  The  question  is  not  how  ought  the  proceeds 
of  production  to  be  shared  ?  but  what  are  the  natural 
laws  which  do  and  will  determine  the  share  of  each  ? 
just  as  in  physical  astronomy  we  inquire,  not  how  the 
planets  ought  to  move  but  how  they  do  move  in  obedience 
to  an  irresistible  force  impressed  upon  them.  Econom- 
ic questions  are  precisely  analogous.  We  never  can 
deal  successfully  with  them  unless  we  bear  this  in  mind. 
The  condition  of  the  public  mind  on  this  class  of  ques- 
tions is  to  a  great  extent  morbid,  and  demands  a  remedial 
treatment.  We  shall  confer  incalculable  benefits  on 
society,  if  we  can  succeed  in  convincing  men,  that  natural 
laws  control  this  class  of  questions,  and  not  the  caprices 
of  human  pride,  selfishness  and  tyranny. 

§  107.  The  principles  already  laid  down  are  so  pre- 
eminently important  in  this  division  of  the  subject,  that 
we  deem  a  little  recapitulation  desirable  if  not  absolutely 
necessary.  In  no  part  of  our  science  is  the  law  of  com- 
petition more  prevalent  and  more  potent.  It  is  our  busi- 
ness to  show  how  that  law  would  divide,  and  when  un- 
counteracted  does  divide  the  products  of  labor,  and  to 
point  out  those  artificial  devices  by  which  this  law  is 
evaded,  and  temporarily,  sometimes  even  for  long  periods, 
rendered  inoperative.  We  have  shown  how  this  is  ac- 
complished in  relation  to  exchanges,  and  pointed  out  the 
disaterous  consequences  which  result  from  it.  If  like 
violations  of  fundamental  law  exist  also  in  this  branch 
of  our  subject,  it  is  equally  our  province  to  point  them 
out,  and    indicate    the    remedy.     Such  attempts    when- 


148  ECONOMICS. 

ever  made  can  result  in  nothing  but  confusion  and 
disaster. 

Let  it  also  be  borne  in  mind,  that  in  our  view  all  Hv- 
ing  human  beings  are  to  be  regarded  as  laborers.  All  at- 
tempts to  divide  human  beings  into  two  classes — laborers 
and  not  laborers — must  fail  and  result  in  confusion  of 
thought.  The  capitalist  is  a  laborer,  not  less  than  he 
that  plows  the  field,  or  works  a  steam  engine.  The 
artist,  the  poet,  the  student,  the  mother,  are  all  laborers. 
Infants  in  their  cradles  are  laborers  in  prospect,  and 
must  be  reared  to  take  the  place  of  others  that  are  soon 
to  pass  away.  The  old  and  the  decrepid  are  laborers 
that  have  done  their  work,  and  their  support  is  a  neces- 
sary charge  on  the  world's  industry. 

In  the  same  manner  all  the  accumulated  results  of 
labor  are  useful  only  to  assist  and  sustain  the  labor  that 
is  now  living.  The  attempt  to  divide  wealth  into  that 
which  is  used  to  aid  and  sustain  labor,  and  that  which  is 
used  to  gratify  desire,  can  result  in  nothing  but  confusion. 
What  is  it  to  support  labor  "i  Is  it  to  give  to  a  human 
being,  considered  as  a  mere  working  machine,  just  so 
much  food  and  clothing  and  shelter  as  are  absolutely 
necessary  to  keep  the  structure  of  bones  and  sinews  and 
muscles  in  working  order  ?  Does  it  not  mean  more  than 
that  ?  To  give  him  the  means  of  living  a  social,  an 
esthetic,  a  moral,  a  religious,  a  human  life  ?  The  life  of 
a  civilized,  developed  man  t  Are  not  then  all  products 
which  are  employed  in  enabling  human  beings  thus  to 
live,  the  true  and  proper  sustentation  of  labor  ?  If  not 
how  are  we  ever  to  draw  the  line  between  what  is  and 
what  is  not  used  for  the  support  of  labor.?  How  are  we 
ever  to  determine  what  portion  of  the  expenditure  of  a 
man  or  of  a  community  is  applied  to  the  support  of  pro- 
ductive labor,  and  what  portion  of  it  is  to  be  set  down 
to  the  gratification  of  desire  ?     Is  it  not  the  simple  truth- 


PRE1.IMINARY    PRINCIPLES.  I49 

that  the  gratification  of  desire  is  the  one  only  object  of 
all  labor,  and  that  it  is  therefore  in  the  nature  of  the  case, 
the  only  possible  reward  of  labor  ?  No  man  ever  did  or 
ever  can  draw  a  definite  line  between  that  which  is  em- 
ployed to  gratify  desire,  and  that  which  is  the  reward  of 
labor.  The  distinction  is  not  definite  and  therefore  not 
scientific. 

Let  us  illustrate  this  by  an  example.  Let  us  sup- 
pose that  a  man  of  great  wealth  sets  aside  one  million 
dollars  to  build  and  decorate  a  palatial  residence.  This 
fund  is  no  less  employed  in  paying  wages  and  furnishing 
helps  to  labor  than  before.  The  stone  quarriers  and 
stone  hewers,  the  masons,  the  carpenters,  the  house  dec- 
orators, the  artists  in  painting  and  statuary  will  feel  the 
stimulus  of  every  dime  of  this  capital  just  as  before. 
Even  after  his  palace  is  completed,  he  may  rent  it,  and 
then  it  will  be  a  part  of  his  capital,  as  truly  as  though  he 
had  spent  it  in  building  a  mill.  Or  he  may  use  it  for 
his  own  residence,  and  then  its  annual  income  will  be  a 
part  of  the  wages  of  his  own  labor.  Even  that  which  he 
expends  in  clothing  and  decorating  his  person  and  the 
persons  of  his  wife  and  children  must  equally  be  em- 
ployed in  supporting  labor,  as  truly  as  in  the  case  of  any 
other  outlay.  It  is  true  that  when  it  has  been  expended 
it  will  be  capital  no  longer,  but  the  same  is  true  of  the 
wages  he  has  paid  to  the  humblest  laborer.  It  is  true 
therefore  that  what  this  man  expends  for  the  gratification 
of  desire  is  as  truly  employed  in  sustaining  and  helping 
labor,  as  any  other  portion  of  his  wealth.  He  may  even 
be  an  epicure  and  a  gourmand,  but  his  cook  is  as  truly 
a  laborer  as  his  carpenter,  and  his  cook-stove  is  as  truly 
fixed  capital  as  any  of  his  steam  engines. 

§  108.  This  general  account  of  the  various  interests 
to  be  provided  for  in  Distribution  seems  at  first  view  so 
complicated  as  to  be  incapable  of  being  reduced  to  any 


15©  ECONOMICS. 

general  system.  This  however  is  merely  in  appearance 
We  must  here  recur  to  our  general  classification.  All 
wealth  is  composed  of  two  elements  only,  Labor  and  Capi« 
tal.  These  only  are  concerned  in  all  Production.  Our 
problem  is  therefore  reduced  to  this  simple  form — to 
show  how  the  products  of  production  are  divided  between 
the  Labor  and  Capital  concerned  in  any  process.  A  two- 
fold division  of  the  subject  is  therefore  clearly  indi- 
cated, viz. 

I.  The  share  which  falls  to  the  laborer. 

IL   The  share  which  falls  to  the  capitalist. 

We  are  aware  that  something  must  yet  be  said  in 
justification  of  this  classification,  but  we  prefer  to  con- 
sider that  subject  in  connection  with  land  and  rent,  and 
therefore  postpone  the  matter  for  the  present. 


CHAPTER   IL 

Wages  Determined  by  Competition. 

§  109.  Definition.  That  share  of  the  result  of  any 
productive  process  which  falls  to  the  laborer  is  called  wages. 

The  aspect  under  which  this  subject  presents  itself 
in  those  nations  that  have  attained  to  the  most  advanced 
civilization  is  not  the  most  favorable  to  an  understand- 
ing of  it,  in  its  elementary  principles.  In  the  first  rude 
beginnings  of  society,  every  man  is  a  laborer  without 
capital.  He  must  provide  what  is  necessary  to  the  sup- 
port of  life,  while  he  invents  and  fabricates  his  first  sim- 
ple tool.  When  he  has  made  that  tool,  he  is  its  owner. 
He  has  become  both  a  laborer  and  a  capitalist.  If  he 
exchanges  his  products,  he  will  demand  compensation 


WAGES   DETERMINED    BY   COMPETITION.  151 

both  for  his  labor  and  his  capital,  in  the  price  he  will 
demand  for  his  commodities,  and  so  far  as  he  can  under 
the  law  of  competition,  he  will  obtain  both  wages  and 
profit.  He  cannot  arbitrarily  and  by  his  own  will  deter- 
mine either  the  one  or  the  other.  Even  in  these  rude 
beginnings  of  the  economic  system,  competition  will  assert 
its  stern  supremacy  as  a  law  of  nature.  As  soon  as  the 
results  of  his  labor,  assisted  by  such  tools  as  he  can  in- 
vent and  fabricate,  are  more  than  sufficient  to  furnish 
necessaries,  he  can  decide  by  his  own  will  how  much  he 
will  expend  in  the  gratification  of  other  desires  than  that 
of  gain,  and  how  much  he  will  invest  in  improved  tools  to 
render  his  labor  more  productive.  He  is  both  a  laborer 
and  capitalist,  and  he  can  judge  for  himself  what  wages 
he  will  demand  for  that  labor  which  he  expends  in  the 
management  of  his  capital. 

The  greater  theextejit  to  which  this  condition  of  things  can 
be  perpetuated  in  the  most  advanced  stages  of  civilization,  the 
better  it  is  for  the  individual  and  for  society.  It  is  always 
true  that  the  laborer  who  works  with  his  own  tools  and 
upon  his  own  capital,  will  for  that  reason  be  more  in- 
dustrious, more  skillful  and  more  frugal.  The  products 
resulting  from  such  a  natural  combination  of  labor  and 
capital  will  be  more  abundant  and  more  excellent,  be- 
cause the  laborer  is  constantly  stimulated  by  the  consid- 
eration, th§t  all  which  he  produces  is  his  own,  to  be  dis- 
posed of  according  to  his  own  will.  The  best  economic 
system  for  every  country  and  for  the  world  is  that  in  which, 
to  the  utmost  possible  extent,  labor  and  capital  are  united 
in  the  same  person.  All  political  and  social  systems 
which  tend  to  collect  capital  into  few  hands,  and  to  re- 
duce the  many  to  the  condition  of  laborers  without  capi- 
tal, are  impediments  to  the  increase  of  the  wealth  and 
happiness  of  mankind. 

§  no.  It  is  however  inevitable  that,  to  a  greater  OT 


I  $2  ECONOMICS. 

less  extent  in  the  progress  of  society,  the  laborer  will  be 
destitute  of  capital,  and  the  capitalist  will  find  the  neces- 
sity of  employing  more  labor  than  his  own  hands  can 
perform,  in  order  to  put  all  his  capital  to  use.  Ifeua 
the  relation  of  employer  and  employed  becomes  inevitable. 
As  soon  as  this  relation  originates,  the  question  of  wages 
necessarily  arises,  and  we  are  forced  to  discover  and 
apply  the  natural  laws  on  which  its  adjustment  depends. 
This  question  has  been  growing  in  importance  and  in 
difficulty  for  generations.  At  present  it  is  very  obvious, 
that  capitalists  who  employ  laborers  and  laborers  who 
work  with  other  men's  capital  are  engaged  in  a  conflict 
with  each  other  of  which  it  is  difficult  to  foresee  the  end. 
Violent  passions  and  bitter  antipathies  have  sprung  up 
in  the  progress  of  this  conflict,  which  unless  the  strife  is 
terminated  by  a  satisfactory  adjustment,  threaten  anarchy 
and  revolution.  Only  one  mode  of  adjustment  is  in  the 
nature  of  the  case  possible.  The  natural  laws  which  pre- 
vail in  this  department  must  be  ascertained  and  ex- 
pounded to  the  satisfaction  of  both  parties.  Such  an 
understanding  of  these  laws  does  not  at  the  present  time 
exist  in  either  of  the  parties.  If  there  is  a  science  of 
wages,  this  is  the  time  when  it  ought  to  be  expounded. 

//  is  wrong  to  speak  of  this  conflict^  as  we  are  accustomed 
to  do^  as  a  conflict  between  capital  a?td  labor.  In  this  coun- 
try at  least  it  is  still  true,  that  a  very  large  portion  of  the 
labor  is  performed  by  men  who  own  capital,  and  in  all 
countries  capitalists  are  laborers.  The  conflict  is  not 
between  labor  and  capital,  but  between  laborers  who  have 
no  capital^  and  capitalists  who  have  need  of  other  labor  than 
their  own^  to  utilize  their  capital.  To  avoid  therefore 
any  confusion  of  thought  which  might  find  its  way  into 
our  discussion  of  this  part  of  the  subject,  we  shall  use 
the  word  employer  for  the  capitalist  who  hires  laborers, 
and  the  word  employe  for  the  laborer  who  is  hired  to 


WAGES   DETERMINED    BY   COMPETITION.  153 

work  upon  capital  which  belongs  to  another.  This  will 
locate  the  conflict  precisely  where  it  is,  between  employ- 
ers and  employes. 

On  the  side  of  the  employe  it  is  assumed,  that  his 
wages  are  determined  by  the  arbitrary,  selfish  and  tyran- 
nical will  of  his  employer,  and  that  this  is  the  reason 
why  his  portion  is  so  scanty  and  inadequate  to  the  com- 
fortable support  of  himself  and  his  family.  He  is  apt 
also  to  forget  that  the  foundation  of  that  fortune  out  of 
which  comes  the  capital  that  furnishes  him  the  employ- 
ment he  has,  was  very  probably  laid  in  frugal  self-denial 
quite  as  severe  as  that  which  he  is  obliged  to  practice. 
In  such  circumstances  it  is  quite  impossible  that  the  two 
should  meet  each  other  on  terms  of  friendship  and  con- 
fidence. The  needle-woman  for  example,  wearing  away 
her  life  "  stitch  by  stitch,"  in  her  miserable  garret,  be- 
lieves that  she  is  the  victim  of  her  employer's  grasping 
greed  of  gain,  that  the  starvation  allowance  which  she 
receives  is  dealt  out  to  her  by  his  arbitrary  and  tyranni- 
cal will.  Nor  is  she  alone  in  this  opinion.  Thousands 
who  in  a  most  commendable  spirit  of  philanthropy  com- 
passionate her  sorrowful  lot,  unite  with  her  in  this  severe 
condemnation  of  the  greed  of  her  employer.  Our  litera- 
ture is  full  of  such  denunciation.  The  inquiry  is  there- 
fore one  of  great  urgency, — Is  there  a  law  of  wages?  If 
so,  what  is  it  ?  And  what  are  the  causes  of  the  terrible 
suffering  we  often  meet  in  the  case  of  persons  who  are 
compelled  to  live  on  the  wages  of  their  labor?  These 
are  grave  questions,  and  if  our  science  can  answer  them, 
the  world  will  acknowledge  it  as  a  benefactor. 

§  III.  Wages  are  not  controlled  by  the  arbitrary  will 
of  the  employer.  The  facts  are  not  consistent  with  this 
supposition.  It  is  true  that  some  classes  of  laborers  are 
in  a  condition  as  miserable  as  they  could  be,  if  it  were  in 
the  power  of  the  most  selfish  of  employers  to  dole  out 
7* 


154  ECONOMICS. 

just  such  compensation  as  they  pleased.  But  these 
cases  of  extreme  suffering  are  exceptional,  not  normal. 
It  will  be  shown  also  in  the  progress  of  this  discussion 
that  these  exceptional  cases  are  due  to  a  violation  of  the 
natural  laws  which  belong  to  the  case,  that  there  is  a 
law  of  wages  which,  had  it  been  allowed  to  have  free 
course,  would  have  prevented  the  mischief.  There  is 
abundant  proof  in  the  history  of  humanity,  that  if  the 
arbitrary  will  of  the  employers  could  dictate  wages,  all 
employes  would  be  in  a  condition  the  most  abject.  This 
is  by  no  means  the  fact.  It  is  true  indeed  that  the  agri- 
cultural laborers  of  England  are  in  a  very  distressed  con- 
dition, but  those  of  many  other  countries  are  in  a  condi- 
tion of  comfort  and  thrift.  The  condition  of  agricultural 
laborers  in  this  country  is  so  easy  and  advantageous, 
that  many  of  them  become  rich  land  owners  and  cap- 
italists. The  condition  of  employes  generally,  though 
in  many  cases  not  satisfactory,  is  by  no  means  consistent 
with  the  supposition  that  wages  are  determined  by  the 
arbitrary  will  of  employers. 

§112.  There  is  positive  proof  that  wages  are  determined^ 
even  in  such  extreme  cases  as  that  of  the  needle-women  al- 
luded to  above,  by  the  law  of  competition,  and  that  neither 
employers  nor  employed  can  escape  from  that  law. 

Let  us  still  further  examine  that  case.  There  is  a 
feeling  rather  than  a  conviction  in  many  minds  that  the 
law  of  competition  is  stern,  harsh  and  cruel,  and  ought  not 
to  be  applied  to  such  a  case  as  this.  If  they  should  say 
what  they  think,  they  would  address  the  employers  of 
such  women  in  some  such  language  as  the  following. 
What  if  the  market  price  has  fallen  to  the  starvation 
rates  which  you  are  paying  these  women  ?  You  ought  to 
be  ashamed  to  accept  their  services  on  such  terms. 
What  if  this  is  all  their  work  will  bring  in  the  market  ? 
Why  not  do  them  simple  justice  by  paying  what  theit 


WAGES    DETERMINED    BY   COMPETITION.  155 

woik  is  really  worth  irrespective  of  competition?  This 
is  very  plausible,  and  seems  to  a  great  number  of  people 
entirely  conclusive.     Let  us  apply  it  to  the  case. 

How  then  shall  we  ascertain  what  is  the  real  value  of 
their  work  ?  This  is  a  question  from  which  we  cannot 
escape.  No  man  can  do  justice  till  he  knows  what  it  is. 
Discarding  competition  therefore  as  inapplicable  to  the 
case,  how  shall  we  find  the  real  value  of  any  work  ?  Let 
us  suppose  that  a  report  of  the  distresses  of  the  needle- 
women in  and  around  some  great  city  has  reached  the 
ears  of  their  employers,  and  deeply  moved  their  com- 
passionate feelings.  A  meeting  of  employers  in  that 
trade  is  immediately  called,  to  consider  what  can  be 
done  for  the  relief  of  all  this  suffering.  They  are  honor- 
able men  and  wish  to  do  justly  and  mercifully.  They 
are  quite  convinced  that  the  wages  of  these  poor  women 
are  not  sufficient  to  sustain  life,  and  they  have  no  heart 
to  starve  helpless  women  for  gain.  They  agree  at  once, 
that  as  competition  has  brought  down  wages  to  this  ruin- 
ous point,  they  will  not  apply  it  to  the  case  any  more, 
but  pay  the  women  what  their  work  is  worth  irrespective 
of  the  market  price.  AH  unite  in  applauding  this  reso- 
lution.    Justice,  philanthropy,  can  ask  no  more. 

How  then  shall  these  noble  men  ascertain  what  the 
work  is  really  worth  ?  But  one  method  is  possible  in  the 
very  nature  of  the  case.  It  must  be  ascertained  how 
much  time  wull  be  occupied  in  making  any  garment,  say 
a  shirt.  That  question  being  settled,  it  must  next  be 
ascertained  what  it  would  cost  a  woman  to  live  in  com- 
fort during  that  time,  and  lay  aside  a  little  for  days  when 
she  will  be  unable  to  work.  How  much  must  she  pay 
for  food,  clothing,  fuel,  rent,  and  all  other  necessaries 
and  such  comforts  as  contribute  to  length  of  life  and 
efficiency  as  a  laborer  ?  Every  one  says  this  is  right. 
How  then  is  the  question  to  be  answered  t    By  the  price 


IS6  ECONOMICS. 

current  of  course.  We  have  no  other  means  of  answer- 
ing it,  and  every  one  knows  that  the  price  current  is 
purely  a  product  of  competition.  Thus  while  intending 
to  emancipate  themselves  from  the  demon  of  competition, 
these  men  find  that  they  are  still  in  his  grasp,  and  cannot 
proceed  a  step  towards  the  accomplishment  of  their 
humane  intention,  except  by  following  his  lead.  The 
attempt  to  escape  from  the  law  of  competition  in  the 
economic  world,  is  just  as  hopeless  as  the  attempt  to  es- 
cape from  gravitation  in  the  material  world.  Its  control 
is  absolute,  universal  and  unrelenting  over  every  eco- 
nomic question. 

§  113.  But  it  may  be  said,  that  though  these  employ- 
ers cannot  escape  from  competition,  they  can  emancipate 
the  poor  needle-women  from  it,  and  fix  their  compensa- 
tion without  reference  to  it. 

This  attempt  will  succeed  no  better  than  the  other. 
These  employers  are  honest,  earnest  men,  determined  to 
do  justice,  and  follow  up  the  inquiry  till  they  reach  the 
result,  that  in  order  that  seamstresses  may  live  by  their 
work,  the  prices  paid  must  be  doubled.  A  new  price- 
list  is  therefore  made  out  on  that  basis,  and  made  public. 
A  joyful  announcement  is  that  to  the  starving  needle- 
women. But  no  sooner  is  this  great  rise  in  the  prices 
made  known,  than  the  number  of  applicants  for  work  in 
that  line  is  increased  in  a  far  greater  ratio  than  the  ad- 
vance in  the  price  of  the  work.  There  are  probably 
three  or  four — it  would  not  be  strange  if  there  were  ten 
women  who  would  be  glad  to  make  shirts  at  a  dollar 
apiece  to  every  one  that  would  make  them  at  fifty  cents 
apiece.  These  starving  women  have  not  escaped  the 
crushing  effect  of  competition,  the  direction  from  which 
it  comes  only  is  changed,  it  is  more  destructive  than  ever. 
Before  it  was  a  ruinous  competition  in  price.  Now  it  is 
a  still  more  ruinous  competition  for  any  work  at  all. 


WAGES    DETERMINED    BY   COMPETITION.  1 57 

Yesterday  one  was  ruined  by  work  at  starvation  prices. 
To-day  she  has  no  work  at  all,  being  quite  driven  from 
the  market  by  the  application  of  a  crowd  of  well-to-do 
women,  whose  condition  is  not  necessitous,  and  who 
would  not  think  of  working  at  such  prices  as  had  been 
fixed  by  competition. 

The  evil  is  still  further  augmented  by  a  new  competition 
which  is  sure  to  spring  up  in  another  quarter.  The  addi- 
tional cost  of  manufacturing  must  be  added  to  the  price 
at  which  the  garment  is  offered  to  the  customer.  This 
must  diminish  the  demand  for  the  goods.  Many  women 
who  have  been  accustomed  to  buy  ready-made  clothing 
for  their  families  will  now  find  the  difference  between 
the  cost  of  the  material  and  the  cost  of  the  ready-made 
garment  to  be  so  great,  that  they  will  make  it  themselves. 
The  employers  will  therefore  sell  fewer  garments,  and 
have  much  less  work  for  the  needle-women  to  do.  The 
employers,  instead  of  benefiting  their  suffering  employes 
by  their  well  meant  effort  to  protect  them  from  competi- 
tion, have  rendered  their  condition  much  worse  than  be- 
fore. They  have  tried  to  relieve  them  from  the  crushing 
effect  of  competition  on  price.  They  have  raised  up  an 
army  of  new  and  powerful  competitors  for  the  work,  and 
greatly  diminished  the  amount  of  work  to  be  done. 

Two  inferences  from  this  case  are  inevitable.  First, 
That  employers  cannot  benefit  employes  by  arbitrarily  raising 
wages  above  the  point  at  which  competition  would  fx  them. 
Second,  That  every  such  effort  arbitrarily  to  raise  wages 
must  inflict  serious  injury  on  all  those  who  are  dependent 
on  the  occupation  i?i  question  for  a  living.  Of  this  it  would 
be  easy  to  furnish  innumerable  illustrations.  The  one 
we  have  given  above  must  suffice.  It  will  be  asked  then 
— can  nothing  be  done  for  such  crushed  and  suffering 
employes  as  these  distressed  needle-women  ?  We  answer, 
their  employers  as  employers,  can  do  nothing  for  them. 


£5^  ECONOMICS. 

Arbitrarily  raising  their  wages  will  injure,  not  benefit 
them.  Their  employers  have  the  same  opportunity  that 
all  other  persons  have  of  relieving  their  sufferings  by  a 
generous  Christian  charity.  There  are  other  aspects 
however  of  this  and  like  cases,  which,  though  of  great 
interest,  are  not  relevant  to  our  present  point  of  inquiry. 
They  will  be  considered  in  another  place. 

§  1 14.  Wages  are  not  therefore  determined  by  the  arbi- 
trary will  of  employers.  The  notion  that  they  are  so  is  a 
m.ischievous  delusion.  In  a  fair  case,  where  competition 
has  had  free  course,  employers  cannot  raise  them  above 
the  point  determined  by  competition.  Every  attempt  to 
do  so  will  prove  equally  disastrous  to  employes  and  em- 
ployers. The  sooner  both  parties  know  that  they  are 
bound  by  a  law  of  nature  from  which  they  are  alike  pow- 
erless to  escape,  the  wiser  and  happier  they  will  be,  and 
the  more  agreeable  and  comfortable  their  relations  to 
each  other. 

It  should  also  be  borne  in  mind,  that  the  competition 
which  determines  wages  (the  amount  of  capital  being 
given,  and  on  that  supposition  we  have  proceeded  in  all 
this  chapter)  is  the  competition  of  labor  with  labor^  and 
not  of  labor  with  capital.  It  not  only  is  not  the  arbitrary 
will  of  the  employer  that  determines  wages,  but,  so  far 
as  there  is  any  will  in  the  case,  it  is  the  will  of  the  em- 
ploye. Wages  settle  at  a  certain  minimum  point  because, 
in  the  conflict  of  competition  employes  select  that  point 
as  their  minimum.  Circumstances  are  found  to  be  such 
that  those  most  anxious  for  employment  prefer  to  make 
their  stand  at  that  point  and  risk  being  unemploj^ed 
rather  than  bid  lower  on  the  one  hand,  and  on  the  other 
they  judge  it  to  be  better  to  accept  what  is  offered  than 
to  incur  the  risk  of  failing  of  employment  if  they  stand 
out  for  more.  This  is  the  only  will  power  that  is  con- 
cerned in  fixing  the  minimum  of  wages.     The  employer 


WAGES   DETERMINED    BY   COMPETITION.  1 59 

has  a  precisely  similar  will  power  in  determining  the 
maximum.  As  there  is  a  point  at  which  those  most  de- 
sirous of  employment,  will  bid  no  lower,  so  there  is  a 
point  at  which  those  most  anxious  to  obtain  laborers  will 
bid  no  higher.  Between  these  extremes  each  party  uses 
his  own  judgment  as  to  what  his  interests  require,  and 
when  an  employer  finds  one  who  will  consent  to  work 
for  such  wages  as  in  the  circumstances  he  judges  it  bes* 
to  offer,  a  contract  will  be  made.  In  no  case  can  one 
will  determine  the  question.  A  contract  is  always  the 
coincidence  of  two  wills.  Competition  is  the  force  by 
which  the  coincidence  of  two  opposing  wills  is  brought 
about. 

Precisely  here  we  must  meet  the  question  of  combma- 
tion  to  resist  competition.  Why  may  not  employes  com- 
bine their  wills  into  the  will  of  one  social  personality, 
and  by  refusing  to  work  except  at  such  wages  as  that 
combined  will  prescribes,  fix  their  own  rate  of  compen- 
sation as  high  as  they  please  ?  On  the  other  hand  why 
may  not  employers  combine  and  determine  wages  at  as 
low  a  point  as  they  please  ?  It  is  true  beyond  a  question 
that  if  the  capitalist  has  more  capital  than  he  can  use 
with  his  own  hands,  the  surplus  will  be  quite  useless 
unless  he  can  employ  laborers.  On  the  other  hand  it  is 
equally  obvious  that  laborers  without  capital  must  be 
employed  by  some  one  who  has  capital.  Why  then  may 
not  either  party  by  combination  determine  wages  by  a 
social  will  ?  This  brings  us  face  to  face  with  one  of  the 
gravest  questions  of  modern  civilization.  Our  next 
chapter  will  be  devoted  to  the  consideration  of  it. 


l6o  ECONOMICS. 


CHAPTER   III. 

Wages  as  A^ecied  by  Combination. 

§  115.  Two  classes  of  combinations  require  our  atten* 
tion — combinations  of  those  desirous  of  obtaining  em- 
ployment entered  into  for  the  purpose  of  raising  wages — 
and  combinations  of  employers  to  reduce  wages. 

Before  entering  however  upon  the  examination  of 
particular  combinations,  it  is  proper  to  remark,  that  there 
are  general  considerations  which  reveal  plainly  enough  the 
impracticability  of  all  attempts  to  control  wages  in  this  man- 
ner. The  interests  of  the  several  persons  or  parties  that 
enter  into  such  a  combination  never  can  be  the  same. 
It  may  be  better  for  one  laborer  to  accept  one  rate  of 
wages  rather  than  run  the  risk  of  failing  to  get  employ- 
ment. That  rate  may  be  to  many  others  quite  ruinous. 
If  combination  fixes  on  the  higher  rate,  the  man  whose 
interests  require  him  to  accept  the  lower  rate  will  feel 
that  the  combination  works  to  his  injury,  and  wish  to  es- 
cape from  it.  Others  will  be  conscious  that  without  the 
combination  they  could  obtain  higher  wages  than  the 
combination  demands.  They  will  therefore  be  reluctant 
to  enter  into  the  combination,  and  impatient  at  being 
bound  by  it.  The  same  difficulties  will  stand  in  the  way 
of  combinations  among  employers.  This  is  the  reason 
why  such  combinations  are  seldom  of  long  continuance. 
They  have  within  themselves  natural  antagonisms,  which 
constantly  tend  to  disruption.  Individuals  not  artificial 
combinations  are  the  natural  units  of  the  economic  sys- 
tem.    Individuality  will  assert  itself. 

The  statement  of  the  case  made  at  the  conclusion  of 
the  last  chapter  shows  clearly  enough  the  impractica- 


WAGES  AS   AFFECTED   BY   COMBINATION.  l6l 

bility  of  all  such  attempts.  If  on  the  one  hand  em- 
ployes can  by  combination  and  refusing  to  work  except 
on  their  own  terms,  compel  employers  to  accede  to  those 
terms,  to  save  their  capital  from  being  useless,  on  the 
other  hand  it  is  equally  in  the  power  of  capitalists  by 
combination  among  themselves  to  compel  their  employes 
to  accede  to  their  terms,  or  submit  to  starvation.  Com- 
bination on  one  side  is  very  likely  to  provoke  it  on  the 
other,  and  nothing  can  be  expected  from  it  but  a  dead 
lock,  which  will  render  capital  and  labor  equally  useless. 
Such  a  dead  lock  is  too  serious  in  its  consequences  to 
continue  long,  and  will  be  likely  to  end  in  a  willingness 
of  both  parties  to  submit  the  case  to  the  natural  working 
of  competition.  •" 

§  ii6.  Combinations  of  labor  against  competition 
assume  the  form  either  of  strikes  or  trades-unions. 

A  strike  is  an  agreement  entered  into  by  employes^  to  de- 
tnaiid  certain  prescribed  terms,  and  to  cease  work  until  those 
terms  are  acceded  to  by  their  employers. 

It  is  admitted  that  under  certain  conditions  such  an 
agreement  may  temporarily  succeed  in  obtaining  the 
wages  demanded.  If  the  occupation  in  which  the  strike 
occurs  is  one  in  which  a  degree  of  skill  is  requisite,  such 
as  can  only  be  acquired  by  some  instruction  and  practice, 
and  if  the  combination  can  be  made  to  embrace  all  the 
persons  possessing  that  skill,  that  are  within  the  reach 
of  the  employers^  it  is  evident  that  the  demands  of  the 
combination  must  be  acceded  to  or  work  will  cease.  If 
the  wages  demanded  are  so  high  as  to  leave  employers 
no  prospect  of  any  profit  in  continuing  the  work,  it  will 
stop,  till  either  the  employes  recede  from  their  demands, 
or  other  laborers  can  either  acquire  the  skill,  or  be  im- 
ported from  abroad.  In  one  or  the  other  of  these  ways, 
the  dead  lock  will  in  time  be  brought  to  an  end,  and  the 
employes  will  fail  of  their  object,  after  having  inflicted 


l62  ECONOMICS. 

much  loss  on  their  employers  and  brought  on  themselves 
a  great  deal  of  suffering. 

If  the  wages  demanded  are  not  so  high  as  to  leave  em- 
ployers no  ma7'gin  of  pi^ofit^  if  it  would  still  be  better  for 
them  to  accede  to  the  demand  than  to  stop  work,  they 
will  be  likely,  for  the  time  being,  to  do  so.  But  it  will 
hereafter  be  shown,  that  every  mode  of  employing  capital 
has  its  natural  rate  of  profit,  and  that  capital  cannot  be 
retained  in  any  mode  of  investment,  where  that  rate  of 
profit  cannot  be  realized.  If  therefore  the  wages  de- 
manded in  the  case  supposed  are  such  as  to  reduce  the 
rate  of  profit  on  capital  employed  in  that  industry  below 
this  natural  standard,  capital  v/ill  be  withdrawn  from  it 
and  otherwise  invested,  the  trade  will  languish,  fewer 
laborers  will  be  employed  or  demanded,  and  those  al- 
ready employed  in  it  will  be  compelled  either  to  with- 
draw from  it  or  recede  from  their  demands.  Thus  wages 
will  decline  to  the  natural  standard  as  determined  by 
competition,  and  the  strike  will  be  ineffectual.  It  will 
be  proved  that  a  law  of  nature  is  too  strong  for  human 
will-power,  though  strengthened  by  combination. 

There  may  be  still  another  case.  It  may  be  that 
when  the  strike  took  place  wages  had  been  reduced  by  a 
combination  of  employers  to  a  rate  which  was  really  below 
the  point  which  would  have  been  fixed  by  free  competition. 
In  this  case  the  employers  will  not  be  able  to  obtain 
workmen  to  take  the  place  of  the  strikers,  either  by  im- 
porting them  from  abroad  or  by  training  new  ones.  If 
therefore  the  employes  are  able  to  hold  out  for  a  time, 
their  employers  will  accede  to  their  demands,  if  they  are 
not  above  the  rates  which  would  have  been  determined 
by  competition.  If  their  demands  are  above  that  rate, 
they  will  not  be  acceded  to,  except  temporarily,  till  an 
adjustment  can  be  made  by  capital  withdrawing  from  the 
trade,  and  thus  diminishing  the  demand  for  labor  in  it. 


WAGES   AS   AFFECTED    BY  COMBINATION.  163 

In  none  of  these  cases  therefore  can  a  combination  of 
employes  succeed,  except  in  the  single  one  in  which  it 
cooperates  with  competition  instead  of  resisting  it.  The 
result  of  this  whole  discussion  shows  therefore  conclu- 
sively, that  employes  are  quite  powerless  to  protect  them- 
selves against  the  results  of  free  competition  by  any  com- 
bination among  themselves. 

§  117.  Trades  unions  are  combinations  of  laborers  of 
another  form  and  aiming  at  other  objects  besides  the 
protection  of  their  members  against  competition.  So  far 
as  they  are  fraternal  associations  of  artisans  of  the  same 
trade,  for  the  purpose  of  promoting  friendly  relations  of 
sympathy  and  helpfulness,  they  lie  entirely  outside  of  the 
sphere  of  our  science,  and  we  have  nothing  to  say  of 
them  here.  They  are  however  permanent  organizations 
with  established  rules  and  regulations,  and  often  propose 
not  only  to  regulate  the  wages  of  their  members,  but  to 
dictate  to  employers  the  methods  in  which  their  affairs  must 
be  conducted  in  many  other  particulars.  Especially  they 
often  attempt  to  confine  the  trade  to  a  limited  number  of 
artisans,  by  refusing  to  work  for  any  employer  who  re- 
ceives more  than  a  prescribed  number  of  apprentices  in 
proportion  to  the  number  of  journeymen  in  his  employ. 
Such  organizations  are  ramified  ovej  whole  nations,  and 
it  is  said  that  some  of  them  are  not  even  confined  by  na- 
tional lines.  It  is  obvious  that  if  such  an  organization 
can  succeed  in  attracting  to  itself  and  bringing  under  the 
control  of  its  regulations  all  who  have  the  skill  of  the 
trade,  and  preventing  the  accession  of  new  members  ex- 
cept in  such  limited  numbers  as  its  rules  prescribe,  cer- 
tain very  important  results  must  follow,  which  all  good 
citizens  would  do  well  to  consider. 

If  a  trades-union  has  the  direct  control  of  all  arti- 
sans who  are  qualified  to  exercise  their  trade  in  a  given 
country,  the  trade  cannot  be  carried  on  except  in  accord- 


164  ECONOMICS. 

ance  with  its  regulations.  Employers  in  that  trade  must 
pay  the  prescribed  rate  of  wages,  or  obtain  no  workmen. 
If  after  paying  such  wages  as  the  union  prescribes,  the 
trade  is  not  remunerative,  owners  must  reimburse  them- 
selves by  exacting  higher  prices  from  the  public  for  their 
products.  These  products  the  community  must  have, 
and  must  therefore  pay  the  price  demanded  by  the  only 
men  who  have  the  skill  to  produce  them.  This  is  of 
course  the  assumption  of  an  unlimited  power  of  taxation 
of  all  other  trades,  and  of  the  whole  community.  By 
limiting  the  number  that  can  be  instructed  in  the  skill  of 
the  trade,  they  exclude  many  young  men  who  desire  to 
enter  it,  from  sharing  its  profits,  and  compel  them  un- 
naturally to  swell  the  stream  of  competition  in  other  trades 
and  occupations.  In  short  they  establish  their  trade  as 
a  perpetual  monopoly. 

§  118.  Let  us  now  inquire  how  such  a  scheme  is  likely 
to  fare  in  the  economic  system  of  this  modern  world.  It  is 
evident  that  if  one  trade  may  build  itself  up  into  such  a 
monopoly,  so  may  any  other.  If  the  principle  is  admis- 
sible and  practicable  in  one  case,  why  not  in  another? 
Soon  every  trade  may  be  a  monopoly.  Each  may  be  a 
permanent  society  making  its  own  regulations,  prescrib- 
ing its  own  wages,  and  limiting  its  own  numbers  as 
narrowly  as  it  pleases,  each  virtually  dictating  the  price 
at  which  its  commodities  shall  be  sold,  each  thus  exact- 
ing from  every  other,  and  each  exacted  upon  by  every 
other,  and  each  losing  vastly  more  by  the  exactions  of  all 
the  rest,  than  it  can  possibly  gain  by  its  own.  In  such 
an  order  of  things  society  would  entirely  lose  its  fraternal 
character,  and  be  composed  of  many  rival  fraternities, 
each  hostile  to  every  other.  This  results  from  the  very 
nature  of  a  monopoly,  whether  created  by  legislative 
enactment  or  by  voluntary  association.  Nothing  is  ad- 
justed by  natural  competition,  every  thing  by  hostile 


WAGES   AS   AFFECTED    BY    COMBINATION.  165 

exaction.  Meanwhile  a  large  portion  of  the  community 
are  incapable  from  the  nature  of  their  occupations  of 
organizing  any  monopoly  at  all,  and  are  exposed  to  the 
exactions  of  all,  without  any  possibility  of  self-defense  or 
retaliation. 

We  have  seen  the  tendency  of  "  Protection  "  to  or- 
ganize every  protected  branch  of  industry  into  such  a 
monopoly  hostile  to  every  other  and  to  society  at  large. 
The  only  difference  between  that  case  and  this  is,  that  is 
a  monopoly  created  and  sustained  by  legislation  ;  this  is 
an  attempt  to  establish  a  monopoly  without  the  aid  of 
government.  In  principle  and  aim  the  two  cases  are 
exactly  alike.  Their  common  object  is  to  protect  their 
industry  from  the  beneficent  natural  law  of  competition. 
It  is,  we  think,  obvious  enough,  that  if  such  a  system  of 
ideas  can  be  carried  out  in  practice,  either  in  the  one 
case  or  the  other,  the  civilized  nations  of  modern  Chris- 
tendom are  threatened  with  very  serious  disaster.  Can 
the  attempt  succeed  ? 

§  119.  The  ultimate  and  general  success  of  such  schemes 
in  an  age  of  freedom  and  intelligence  is  impossible.  Such 
ideas  have  prevailed  and  been  put  in  practice  in  the  past 
ages  of  European  civilization,  to  an  extent  of  which  the 
men  of  the  present  time  have  very  little  conception.  Till 
a  comparatively  recent  period,  even  in  England,  every 
trade  was  a  monopoly  sanctioned  and  encouraged  by  the 
government.  But  the  time  of  such  legislation  has  gone 
by  forever,  or  at  least  till  the  Dark  Ages  return  upon  the 
world  again. 

In  the  present  conditions  of  society,  it  is  impossible 
for  such  an  association  to  attract  to  itself  all  the  workmen 
who  possess  the  skill  of  the  trade.  Many  will  have  the 
good  sense  to  prefer  the  chances  of  success  under  free- 
dom and  natural  competition.  This  is  true  as  a  matter 
of  fact.     Such  workmen  will  be  favored  and  encouraged 


1 66  ECONOMICS. 

by  employers,  and  find  their  own  advantage  in  their 
independent  position.  The  trades-unions  will  not 
therefore  be  able  to  obtain  the  monopoly  of  the  trades. 
They  will  equally  fail  in  their  efforts  to  limit  the  number 
who  can  acquire  the  skill  of  the  respective  trades.  Arti- 
sans who  are  not  attached  to  any  union  will  freely  in- 
struct young  men  wishing  to  acquire  the  skill  of  any 
trade,  and  their  numbers  will  be  indefinitely  multiplied. 
For  the  same  reasons  which  were  given  in  connection 
with  the  strikes,  they  will  not  be  able  to  resist  compe- 
tition in  determining  the  wages  of  their  own  labor.  They 
can  permanently  succeed  under  the  same  conditions  and 
only  under  the  same  conditions  as  strikes,  that  is  when 
there  is  an  abnormal  condition  of  things  in  which  wages 
are  lower  than  the  rate  at  which  competition  will  fix 
them,  so  that  competition  itself  will  co-operate  with  their 
efforts  to  raise  the  rate. 

§  1 20.  There  is  another  insuperable  obstacle  to  the  success 
of  any  combination  to  raise  wages  above  the  standard  of 
competition.  Grant  that  by  such  combinations  they  may 
take  the  question  of  wages  into  their  own  hands,  and 
appropriate  to  themselves  just  so  much  of  the  gains  of 
production  as  they  choose,  the  consequence  will  be,  that 
capital  will  cease  to  be  accumulated,  because  it  will  cease 
to  be  of  any  benefit  to  its  owner.  If  capitalists  discover 
that  nothing  can  be  gained  by  accumulating,  that  labor- 
ers really  own  all  that  is  accumulated,  they  will  not  save 
for  the  barren  purpose  of  calling  it  their  own.  Laborers 
will  soon  discover  that  they  have  killed  the  hen  that  laid 
the  golden  eggs,  that  by  refusing  to  capital  its  proper 
share  of  the  gains  of  production,  they  have  annihilated 
that  by  which  their  labor  was  supported  and  assisted. 
Our  country  is  at  the  present  moment  abounding  in  sor- 
rowful proofs  of  the  truth  of  this  assertion.  A  very  few 
years  ago,  at  a  time  when  wages  were  higher  than  at  any 


WAGES   AFFECTED    BY   COMHINATION.  1 67 

former  periods  of  our  history,  the  daily  papers  were  filled 
with  reports  of  the  strikes  of  employes  in  almost  all  the 
leading  branches  of  trade,  clamorously  demanding  more 
wages  and  often  with  additional  details  of  violence 
offered  to  laborers  who  still  chose  to  work,"and  of  the 
reckless  destruction  of  the  property  of  their  employers. 
At  this  time  our  doors  are  almost  besieged  by  tramps,  tell- 
ing the  pitiful  story  of  being  out  of  employment,  and  beg- 
ging for  a  piece  of  bread  to  save  them  from  imminent 
starvation.  Who  has  told  us  or  can  tell  us  how  much  of 
the  present  destitution  is  due  to  the  fact,  that  by  the  strikes 
of  those  years  of  extravagance,  employers  were  induced,  by 
the  pressure  of  present  seeming  necessity,  to  pay  wages 
which  they  could  not  afford,  and  as  a  consequence  have 
now  no  capital  with  which  to  pay  any  wages  or  employ  any 
laborers  ?  As  from  day  to  day  we  are  feeding  these  poor 
wretches,  we  are  much  reminded  of  those  years  of  the 
arrogant  extravagance  of  laborers.  One  extreme  follows 
another.  Laborers  about  to  engage  in  a  strike  should 
think  of  the  fable  of  the  hen  that  laid  golden  eggs. 

§  121.  It  remains  to  mquire  whether  employers  ca7i^  by 
combination^  reduce  wages  below  the  standard  of  competition. 
This  part  of  the  subject  may  be  disposed  of  in  very  few 
words.  It  is  never  more  than  a  very  small  portion  of 
the  capital  of  the  world  or  even  of  a  single  country  that 
can  be  brought  into  any  such  combination.  Let  us  take 
as  an  illustration  the  great  coal  monopolies  of  Pennsyl- 
vania. Those  great  companies  can  and  do  combine  for 
certain  purposes  which  are  injurious  enough  to  the  gen- 
eral welfare.  But  they  have  little  prospect  of  success  in 
any  effort  they  may  make  to  reduce  wages  below  the 
market  rate.  The  demand  for  labor  in  the  United  States 
is  so  great,  that  that  portion  of  it  which  is  represented  by 
these  companies  is,  in  comparison  with  the  whole,  quite 
insignificant.     The  coal  fields  of  the  whole  country  are 


1 68  ECONOMICS. 

SO  extensive,  that  those  of  Pennsylvania  are  relatively 
too  small  to  exert  any  appreciable  influence  on  the  de- 
mand for  labor.  If  the  miners  employed  by  those  com- 
panies do  not  emigrate  to  other  fields,  rather  than  work 
for  wages  that  are  below  the  market,  the  fault  must  be 
in  their  own  stupidity  and  folly.  In  a  great  free  country 
like  this  the  laborer  who  remains  under  any  such  at- 
tempted oppression  has  small  claim  on  public  sympathy. 

//  is  always  necessary  to  the  success  of  any  combiiiation 
of  capital^  that  it  should  have  the  reputation  of  payiftg  fair 
wages  to  its  employes.  Otherwise  its  interests  will  greatly 
suffer  from  the  difficulty  of  obtaining  a  sufficient  supply 
of  competent  laborers.  Of  this  our  great  competing 
lines  of  railways  afford  a  striking  illustration.  For  cer- 
tain purposes  they  manifest  a  disposition  to  combine  for 
the  purpose  of  resisting  competition  on  the  most  gigantic 
scale.  But  they  have  little  power  to  reduce  the  wages 
of  their  employes  below  the  standard  of  competition. 
Not  one  of  them  would  dare  to  let  the  impression  go 
abroad,  that  their  employes  are  less  liberally  rewarded 
than  those  employed  in  other  branches  of  industry. 

All  the  conclusions  of  this  chapter  might  be  confirmed 
by  an  appeal  to  facts.  Multitudes  still  cling  to  the  belief 
that  the  law  of  competition  can  be  resisted  by  combina- 
tion of  human  wills.  New  combinations  are  formed  from 
time  to  time  and  some  of  them  obtain  a  temporary  suc- 
cess. But  it  is  only  temporary,  they  soon  fall  to  pieces, 
and  the  stream  of  wages  settles  back  into  the  well-worn 
channels  of  competition.  Were  the  history  faithfully 
written  of  all  the  efforts  of  this  sort  which  have  disturbed 
the  quiet  of  the  economic  world  within  the  last  fifty 
years,  we  think  it  would  convince  any  candid  mind  of 
the  impracticability  of  ever  adjusting  matters  between 
employers  and  their  employes  by  any  such  methods. 
The  conflict  never    can  be  terminated,  except  by  an 


WAGES   AFFECTED    BY   COMBINATION.  1 69 

appeal  to  some  established  and  recognized  natural  law. 
We  admit  that  in  peculiar  circumstances  that  law  has 
sometimes  produced  results  which  are  far  from  satisfac- 
tory. But  it  will  be  shown  in  the  progress  of  this  trea- 
tise, that  those  results  are  not  due  to  competition  pure 
and  simple,  but  to  vicious  social  or  political  arrange- 
ments which  have  turned  aside  competition  from  its 
natural  and  legitimate  course. 

§  122.  In  all  that  has  been  said  in  this  chapter  of 
combinations  against  competition,  it  has  been  presumed 
that,  in  the  efforts  of  either  party  to  dictate  terms  to  the 
other,  peaceable  means  only  will  be  used.  As  in  this  con- 
flict physical  force  is  always  on  the  side  of  the  employes, 
they  only  are  for  the  most  part  under  any  temptation  to 
resort  to  unlawful  means.  If  they  not  only  refuse  to 
work  except  on  terms  of  their  own  dictating,  but  resort 
to  violence,  to  hinder  other  laborers  coming  in  and  ac- 
cepting employment  in  their  places,  and  in  destroying 
the  property  of  their  employers,  the  thing  will  then  have 
passed  out  of  the  sphere  of  science,  and  we  must  look 
upon  it  as  we  do  upon  any  other  insurrection  against  the 
supremacy  of  the  laws,  and  the  peace  of  society.  The 
government  should  suppress  any  such  outbreak  of  vio- 
lence with  the  utmost  promptness  and  rigor.  It  is  the 
foremost  duty  which  the  government  owes  to  the  eco- 
nomic interests  of  the  people.  That  any  man  is  at  lib- 
erty to  judge  for  himself  what  wages  he  will  demand,  or 
whether  he  will  work  at  all,  all  admit,  and  the  govern- 
ment will  protect  every  one  in  the  exercise  of  that  right. 
But  the  employer  owns  his  capital,  as  truly  as  the  em- 
ploye owns  his  labor,  and  will  judge  for  himself  what 
wages  it  is  expedient  for  him  to  pay,  and  whether  in 
given  circumstances  he  will  run  his  machinery  or  allow 
it  to  stand  idle.  If  one  laborer  will  not  accede  to  his 
terms,  he  may  employ  another  that  will.  If  this  matter 
8 


lyo  ECONOMICS. 

is  to  be  carried  through  by  force  on  either  side,  there  is 
nothing  for  the  community  but  revolution,  anarchy,  the 
annihilation  of  capital,  the  cessation  of  productive  in- 
dustry, and  the  extreme  distress  of  all  classes.  It  must 
however  be  borne  in  mind  that  if  one  party  resorts  to 
violence  the  other  party  must  appeal  to  that  force  which 
the  government  knows  how  to  wield  for  protection. 


CHAPTER  IV. 
Variation  of  the  Rate  of  Wages. 

§  123.  In  the  two  preceding  chapters  we  have  shown 
that  competition  is  always  a  controlling  force  in  determin- 
ing wages,  and  that  it  cannot  be  permanently  resisted  by 
any  possible  combination  of  human  will-power,  whether 
on  the  side  of  employers  or  of  the  employed.  But  com- 
petition is  not  a  blind  force.  It  acts  through  rational 
minds  and  free  wills.  It  does  not  therefore  come  to  the 
same  result  in  all  cases,  but  its  determinations  are  as 
various  as  the  circumstances  and  conditions  in  view  of 
which  it  is  called  to  act.  The  rate  of  wages  fixed  by 
competition  is  not  the  same  in  different  places  at  the 
same  time,  or  in  the  same  place  at  different  times.  The 
wages  of  different  persons  vary  widely  from  each  other,  as 
well  as  the  wages  of  different  occupations. 

It  is  our  object  in  this  chapter  to  point  out  the  lead- 
ing causes  of  these  variations  of  the  rate  of  wages,  and  to 
show  that  they  all  result  from  the  law  of  competition 
applied  to  a  great  variety  of  circumstances  and  condi 
tions. 

§  124.  The  first  cause  of  variation  which  we  shall 


VARIATION    OF    THE    RATE    OF    WAGES.  171 

mention  is  the  changing  ratio  between  the  number  of  labor- 
ers without  capital  seeking  employment^  and  the  amount  oj 
capital  depefident  for  its  productiveness  on  hired  labor.  It 
is  common  to  state  this  case  in  another  form,  to  say  that 
the  wages  of  labor  are  dependent  on  the  ratio  of  the 
number  of  laborers  to  the  amount  of  capital.  This  is 
not  accurate.  All  that  capital  which  is  kept  employed  by 
the  personal  labor  of  those  that  own  it,  and  all  the  labor- 
ers who  work  with  their  own  capital  are  to  be  left  out  of 
the  account  as  having  no  influence  on  the  rate  of  wages. 
If  all  capital  were  employed  by  the  labor  of  its  owners, 
and  all  laborers  used  their  own  capital,  there  could  be 
no  wages,  however  great  the  amount  of  labor  and  capital 
might  be.  Bearing  this  limitation  in  mind,  it  is  plain 
that  the  rate  of  wages  is  a  function  of  two  variables — 
labor  and  capital. 

The  amount  of  labor  remaining  the  same,  any  increase 
in  the  amount  of  capital  employing  labor  must  necessarily 
increase  the  demand  for  laborers.  A  man  who  has  only 
capital  enough  to  aid  and  sustain  his  own  labor  can  hire 
no  laborers  unless  he  is  willing  to  be  idle  himself.  He 
who  has  enough  for  two  laborers  will  wish  to  employ 
one,  and  so  often  as  he  adds  to  his  capital  a  sufficient 
amount  to  fit  out  another  laborer,  he  will  demand  an- 
other. This  holds  universally.  Other  things  being 
equal,  the  more  capital  any  one  has  the  more  laborers  he 
will  demand.  The  same  will  be  true  of  all  capitalists 
who  own  more  capital  than  they  can  employ  with  their 
own  hands.  It  is  true  that  some  modes  of  employing 
labor  require  a  much  greater  amount  of  capital  to  each 
laborer  than  others.  In  the  statements  just  made  we 
must  be  understood  to  mean  by  the  amount  of  capital 
necessary  to  fit  out  a  laborer,  the  average  amount  to  each 
laborer,  taking  all  the  difi'erent  modes  of  employing  labor 
into  the  account.     With  this  understanding  of  the  Ian- 


172  ECONOMICS. 

guage  just  used,  it  is  strictly  true  that  the  demand  for 
labor  varies  directly  as  the  amount  of  capital  dependent 
for  being  utilized  on  hired  labor.  Wages  will  therefore 
vary  in  the  same  ratio.  The  greater  the  amount  of  such 
capital  in  the  market,  the  more  will  its  owners  bid  against 
each  other  for  laborers,  and  the  higher  the  point  to  which 
wages  will  be  raised.  If  in  a  free  and  prosperous  com- 
munity wages  are  very  high,  it  is  an  indication  that  the 
amount  of  capital  seeking  to  employ  laborers  is  very 
great  in  proportion  to  the  number  of  laborers  that  can  be 
employed.  The  rapid  increase  of  the  wealth  of  employ- 
ers by  legitimate  production  implies  a  corresponding  in- 
crease in  the  wages  of  those  whom  they  employ. 

On  the  other  hand,  by  an  exactly  similar  mode  of 
reasoning  it  would  be  made  apparent  that,  the  amount 
of  capital  dependent  for  its  utilization  on  hiring  labor 
remaining  constant,  if  the  number  of  laborers  without  capi- 
tal is  increased^  wages  will  decline.  The  demand  for  em- 
ployment will  outrun  the  supply,  laborers  will  bid  against 
each  other  under  the  apprehension  of  being  unemployed, 
and  employers  will  obtain  the  labor  they  need  at  lower 
rates.  If  this  state  of  things  continues  for  a  course  of 
years  or  for  generations,  the  condition  of  the  laborer  will 
become  worse  and  worse,  and  pauperism  and  starvation 
will  be  unavoidable.  Many  writers  on  the  subject  have 
come  to  the  sorrowful  conclusion,  that  this  is  the  inevita- 
ble fate  of  the  laborer  in  countries  of  dense  population. 
We  hope  to  show  in  another  part  of  this  treatise,  that  if 
economic  laws  are  observed,  such  apprehensions  are  as 
groundless  as  they  are  gloomy. 

§  125.  If  both  the  amount  of  capital  seeking  to  hire 
laborers,  and  the  number  of  laborers  seeking  employment 
are  variable,  then  the  wages  of  labor  will  depend  on  the 
ratio  which  these  variables  sustain  to  each  other.  If  the 
capital  increases  more  rapidly  than  the  number  of  labor- 


VARIATION    OF   THE    RATE    OF    WAGES.  1 73 

ers,  wages  will  be  constantly  advancing;  but  if  the  num- 
ber of  laborers  seeking  eniployment  increases  more 
rapidly  than  the  capital,  wages  must  with  equal  constancy 
decline.  In  this  law  we  find  an  explanation  of  the  ex- 
cee.dingly  low  wages  paid  in  India  and  some  other  coun- 
tries of  very  dense  population.  Population  has  increased 
because  the  cost  of  the  necessaries  of  life  is  in  that  cli- 
mate very  small.  On  the  other  hand  the  government 
of  the  country  has  been  arbitrary  and  despotic,  and  the 
rights  of  property  have  never  been  protected.  The  pres- 
ent condition  of  the  country  presents  all  the  phenomena 
of  an  exceedingly  dense  population  with  vast  numbers  of 
men  who  depend  on  employment  for  their  daily  bread, 
yet  little  capital  has  been  accumulated. 

The  dependence  of  wages  on  the  ratio  of  the  number 
of  laborers  seeking  employment  to  the  amount  of  capital 
dependent  for  its  utilization  on  hired  labor  is  one  of  the 
most  important  principles  of  our  science.  It  shows  con- 
clusively, that  the  impression  so  commonly  entertained^  that 
employers  and  employes  are  natural  enemies  to  each  other^  is 
entirely  without  foundation.  If  employers  prosper  by 
legitimate  production,  their  demand  for  laborers  will  be 
increased,  and  the  law  of  wages  is  such  as  to  insure  to 
laborers  a  share  in  that  prosperity.  The  employer  will 
have  demand  for  more  laborers,  and  will  be  compelled 
to  offer  them  more  favorable  terms  in  order  to  obtain 
them,  and,  for  long  periods  and  in  the  general  course  of 
trade,  employers  can  escape  from  this  necessity  by  no 
combinations.  On  the  other  hand,  if  the  employer  fails 
to  receive  his  profits  he  will  have  no  increased  demand 
for  labor,  he  will  soon  find  no  motive  to  continue  the 
processes  of  production,  he  will  seek  out  more  profitable 
methods  of  employing  his  capital,  and  the  laboiers  he 
has  employed  will  be  out  of  employment.  It  is  always 
in  some  degree  difficult  for  the  employe  to  appreciate  his 


174  ECONOMICS. 

relation  to  the  capital  that  employs  him.  His  employer 
is  a  wealthy  man,  and  enjoys  those  comforts  and  elegan- 
cies of  life  which  wealth  can  purchase.  His  employes 
are  often  in  straightened  circumstances,  and  from  neces- 
sit}  lead  frugal  lives,  denying  themselves  many  of  the 
comforts  which  their  employer  enjoys.  They  are  apt  to 
forget,  that  the  foundation  of  that  very  fortune  which 
furnishes  them  employment,  was  probably  laid  in  the  prac- 
tice of  just  such  frugal  self  government  as  that  in  which 
they  are  living ;  that  if  their  employer  or  some  ancestor 
of  his  had  not  practiced  just  such  self-government,  the 
capital  which  now  helps  and  sustains  their  labor  would 
never  have  had  any  existence.  Capital  and  labor,  em- 
ployers and  employes  are  not  natural  enemies,  with  in- 
terests antagonistic  to  each  other,  but  fellow  laborers  for 
a  common  end.  So  this  relation  will  be  regarded  by 
both  parties,  whenever  the  principles  of  our  science  are 
generally  understood  and  accepted. 

§  126.  Another  cause  which  creates  variation  of  the 
rate  of  wages  is  the  use  of  labor-saving  machinery.  It  is 
obvious  this  must  be  one  of  the  elements  of  the  problem. 
No  one  introduces  a  machine  or  even  a  simple  tool  into 
any  industrial  process,  except  for  the  purpose  of  accom- 
plishing the  end  aimed  at  by  a  diminished  amount  of 
labor.  An  instrument  that  will  not  accomplish  .this  is 
not  labor-saving,  and  will  therefore  never  be  used  at  all. 
The  first  effect  therefore  in  all  cases  of  introducing  labor- 
saving  machinery  must  be,  that  a  given  end  is  attained 
with  a  less  outlay  of  labor.  Our  first  thought  might  be, 
that  this  settles  the  whole  question,  and  that  the  use  of 
labor-saving  machinery  must  diminish  the  demand  for 
labor  and  reduce  the  rate  of  wages.  But  this  will  be 
found  to  be  a  very  superficial  and  deceptive  view  of  the 
subject.  No  one  indeed  will  deny  that  machinery  en- 
ables a  man  to  attain  a  given  end  with  less  labor ;  and 


VARIATION    OF   THE    RATE    OF    WAGES.  1 75 

could  the  inventor  of  the  machine  keep  his  own  secret 
and  confine  the  use  of  it  to  himself  alone,  he  might  be 
able  to  sell  his  products  without  any  reduction  of  price, 
and  in  such  increased  quantity  as  to  supply  tj:ie  whole 
demand,  and  drive  all  other  labor  and  capital  from  the 
trade.  In  that  case  he  might  greatly  diminish  the  de- 
mand for  labor  in  that  trade  without  increasing  it  in  any 
other  trade. 

But  such  a  secret  cannot  be  kept,  and  the  inventor, 
well  aware  of  that  fact,  will  be  easily  induced  by  the 
grant  of  a  patent  right,  to  communicate  his  secret  to  the 
public.  As  soon  as  this  is  done,  competition  in  the 
trade  will  speedily  approximate  its  profits  to  the  general 
level,  and  the  result  will  be  a  reduction  of  the  price  of 
the  commodity  whose  cost  is  affected  by  the  machine, 
nearly  in  proportion  to  the  diminished  amount  of  labor 
necessary  to  produce  it.  Such  a  reduction  in  the  price 
of  the  commodity  will  produce  a  vast  increase  of  the  de- 
mand, resulting  from  the  fact  that  great  multitudes  now 
use  it,  who  at  the  former  price  were  quite  unable  to 
afford  it.  In  the  course  of  the  past  century  many  com- 
modities which  at  the  beginning  of  the  period  were  con- 
fined to  the  palaces  of  the  rich,  have  found  their  way  to 
the  humble  dwellings  of  the  sons  of  toil.  By  this  pro- 
cess, in  the  case  of  most  really  valuable  labor-saving  ma- 
chines, the  increased  demand  for  the  commodity  has 
very  far  more  than  balanced  the  saving  of  labor  in  its 
production,  and  i?i  the  ultimate  result  immensely  increased, 
the  demand  for  labor  in  that  very  departmetit.  Perhaps 
no  better  illustration  can  be  found  than  the  art  of  print- 
ing. To  say  nothing  of  printing  itself,  the  demand  for 
labor  in  manufacturing  printing  paper  exceeds  beyond 
all  comparison  the  whole  demand  for  labor  in  the  book 
trade  which  could  have  existed,  if  the  art  of  printing  had 
not  been  invented.    The  history  of  labor-saving  inven* 


1 76  ECONOMICS. 

tion  furnishes  many  other  examples  of  the  same  ten 
dency,  which  are  equally  pertinent  and  equally  striking, 
A  careful  examination  of  the  facts  of  history,  would  un- 
doubtedly justify  the  conclusion,  that  the  use  of  labor- 
saving  machinery  has  immensely  increased  the  demand 
for  labor,  in  the  very  departments  of  industry  where  it 
has  been  most  employed.  We  have  tried  in  vain  to  call 
to  mind  a  single  instance  of  a  successful  machine  which 
has  come  into  general  use  without  producing  this  effect. 
We  once  thought  the  sewing-machine  would  prove  an 
exception  to  the  general  rule.  But  whoever  calls  to  mind 
the  elaborate  workmanship  of  ladies'  apparel,  which  has 
come  into  use  along  with  the  sewing-machine,  and  we 
think  as  a  consequence  of  it,  will  be  convinced  that  it  is 
no  exception  to  the  rule. 

Exceptions  there  may  be  in  particular  establishments, 
or  within  very  narrow  limits.  Mr.  Fawcett  furnishes  a 
few  particular  cases  of  the  sort.  But  none  of  them  have 
any  tendency  to  invalidate  the  general  principle.  No 
principle  of  the  science  is,  we  think,  established  on  a 
firmer  basis.  Considering  the  influence  of  machinery  in 
increasing  the  demand  for  labor,  it  is  in  that  view  alone 
one  of  the  laborer's  best  friends. 

§  127.  A  certain  class  of  writers  in  this  country,  more 
distinguished  by  an  amiable  philanthropy,  than  by  any 
clear  philosophic  insight,  have  taken  a  very  different 
view  of  this  matter.  Seeing  that  all  labor-saving  ma- 
chinery does  diminish  the  amount  of  living  human  labor 
necessary  to  the  accomplishment  of  a  given  result,  they 
indulge  the  expectation  that  labor-saving  invention  will 
be  carried  to  such  an  extent,  as  to  dispense  with  the 
necessity  of  a  large  portion  of  the  human  effort  which 
has  hitherto  been  necessary  for  the  supply  of  human 
want.  Hence  they  indulge  in  a  dream  of  a  coming  mil- 
lennium of  human  labor,  in  which  no  part  of  the  human 


VARIATION    OF   THE    RATE    OF    WAGES.  1  7) 

race  will  be  under  a  necessity  of  putting  forth  more  effort 
than  would  be  really  necessary  for  the  preservation  of 
health  and  the  full  vigor  of  the  human  constitution.  In 
that  good  time  which  they  dream  is  coming,  they  antici- 
pate that  the  chief  occupation  of  all  persons  will  be  the 
cultivation  of  the  intellect,  and  the  enjoyment  of  the 
])leasures  of  high  art.  The  sentence  pronounced  on  our 
first  ancestor, — "  by  the  sweat  of  thy  face  shalt  thou  eat 
thy  bread  " — they  think  is  to  be  repealed  in  that  happy 
age  of  labor-saving  invention. 

Such  persons  have  certainly  mistaken  the  results 
which  the  improvement  of  machinery  is  to  produce  in 
the  future  of  this  world.  It  has  always  shown  a  tendency 
to  increase  rather  than  diminish  the  demand  for  human 
labor.  In  a  former  part  of  this  treatise  it  has  been  shown, 
that  in  order  that  men  may  feel  the  full  stimulus  to  labor 
which  is  provided  in  the  constitution  of  man,  it  is  neces- 
sary that  all  portions  of  society  should  enjoy  not  only  the 
necessaries  \)f  bare  existence,  but  such  comforts  and  con- 
veniences as  constitute  a  truly  civilized  life.  It  is  by 
means  of  labor-saving  invention,  if  at  all,  that  this  result 
is  to  be  achieved.  It  is  by  this  means  that  the  civilizing 
influences  of  society  are  to  be  so  quickened  and  extended, 
as  to  reach  men  of  every  grade  and  condition.  In  order 
to  the  attainment  of  this  result,  men  are  not  to  lead  aim- 
less and  purposeless  lives  in  the  enjoyment  of  the  pleas- 
ures of  the  appetite  and  the  tastes,  but  lives  of  activity 
and  energy,  in  so  multiplying  the  comforts  and  beauties 
of  life  that  all  may  share  them.  The  age  of  machinery 
is  not  to  dispense  with  human  toil,  but  to  render  the  suc- 
cess of  human  effort  possible,  we  would  fondly  hope 
actual,  in  providing  for  universal  well-being.  The  des- 
tiny of  the  race  is  not  by  labor  to  dispense  with  the 
necessity  of  labor,  but  by  labor  to  attain  the  appropriate 
end  of  all  labor,  a  civilized  humanity. 
8* 


17^  ECONOMICS. 

§  128.  The  principles  just  explained  do  not  seem  to  h 
applicable  to  any  great  extent  to  agricultural  machinery.  It 
was  shown  in  a  former  part  of  this  treatise  that  agricul- 
tural machinery  has  not  thus  far  proved  to  be,  to  any 
considerable  extent,  labor-saving.  Reasons  were  also 
assigned  for  believing,  that  the  same  must  for  the  most 
part  be  true  in  all  the  future.  Should  the  opinions  there 
expressed  stand  the  test  of  future  experience,  as  they  cer- 
tainly do  of  the  past,  machinery  never  can  have  much  influ- 
ence on  the  demand  for  labor  in  that  department.  Even 
if  machinery  should  yet  be  invented  to  reduce  the  amount 
of  human  labor  requisite  for  conducting  agricultural  pro- 
cesses in  the  same  ratio  in  which  it  has  been  reduced  in 
manufactures,  it  would  still  remain  true,  that  the  influence 
exerted  on  the  price  of  agricultural  products  would  be 
very  much  less  than  it  has  been  in  the  case  of  manufac- 
tured goods.  The  price  of  agricultural  products  must 
always  depend  very  largely  either  on  the  rent  of  land,  or 
the  cost  of  transportation.  These  elements  of  cost  would 
both  remain,  however  much  the  labor  requisite  might  be 
diminished  by  machinery.  If  then  such  inventions  are 
ever  made,  it  will  be  a  case  in  which  labor-saving  inven- 
tion diminishes  on  the  one  hand  the  demand  for  labor, 
and  on  the  other  hand  brings  little  compensation  in  the 
cheapness  of  the  product.  We  have  given  our  reasons 
for  believing  that  it  is  very  improbable  any  such  thing 
can  ever  occur.  Even  if  it  does  occur,  the  truth  will 
still  remain  unimpaired,  that  the  tendency  of  labor-saving 
invention  on  the  whole  is,  not  to  diminish,  but  greatly  to 
increase  the  demand  for  labor.  The  conclusions  of  the 
two  previous  sections  will  not  therefore  be  invalidated. 

§  129.  Another  cause  which  produces  variation  of 
the  rate  of  wages  is  the  cost  of  living.  It  is  customary  to 
say,  the  cost  of  food,  or  the  cost  of  the  necessaries  of 
life.     We  object  to  this  as  inaccurate.     It  implies  the 


VARIATION   OF   THE   RATE   OF   WAGES.  1 79 

assumption  that  the  rate  of  wages  is  to  press  downward, 
till  finally  at  the  maturity  of  the  process,  a  bare  existence 
is  all  that  is  to  be  left  to  the  laborer.  This  is  not  the 
necessary  nor  is  it  to  be  the  ultimate  effect  of  compe- 
tition. Neither  is  this  an  accurate  statement  of  the  case. 
It  is  not  mere  increased  costliness  of  food  or  of  the  neces- 
saries of  life  that  raises  wages.  It  is  the  cost  of  living. 
We  are  aware  that  there  are  large  classes  of  laborers  in 
many  countries,  whose  wages  are  so  low  as  to  place  their 
whole  lives  on  the  very  verge  of  starvation.  But  it  is  yet 
to  be  shown  in  a  subsequent  chapter,  that  this  is  not  the 
result  of  any  natural  law,  but  of  a  violation  of  natural 
law. 

Neither  is  it  true  that  wages  do  in  fact  depend  only  on 
the  cost  of  necessaries.  It  has  previously  been  noticed 
that  the  minimum  of  wages  is  always  determined  by  the 
fact  that  those  most  anxious  for  employment  prefer  to 
run  the  risk  of  being  unemployed,  rather  than  make  a 
lower  bid.  In  determining  the  point  at  which  such  a 
stand  is  to  be  made,  an}'-  man  who  has  before  his  mind  a 
standard  of  living  in  some  degree  of  comfort  would  take 
into  the  account  not  only  what  it  would  cost  him  and 
those  dependent  on  him  to  escape  starvation,  but  what 
it  would  cost  him  to  live  according  to  his  conception  of 
life.  If  he  finds  that  in  a  given  position  no  wages  are 
offered  which  will  enable  him  to  support  such  a  mode  of 
life,  he  will  change  his  position,  he  will  seek  some  new 
employment^,  he  will  emigrate  if  need  be,  in  order  to  find 
some  position  in  which  he  can  earn  a  living.  In  the 
present  condition  of  the  world,  and  with  present  facilities 
of  locomotion,  no  laboring  population  will  quietly  remain 
where  they  must  work  at  starvation  prices,  unless  they 
have  been  reduced  to  utter  despondency  by  generations  of  ex^ 
periefice  in  hopeless  poverty.  Such  a  population  may  from 
sheer  ignorance,  stupidity  and  despondency,  accept  as  a 


t8o  economics. 

remuneration  for  their  labor  the  naked  boon  of  continued 
existence ;  no  other  will.  We  shall  show  hereafter  that 
such  a  compensation  is  not  in  the  sense  of  our  science^  wages. 
It  is  not  the  result  of  competition.  The  economic  condi- 
tions of  such  a  life  differ  very  little  from  those  of  slavery. 
It  is  noticeable  in  respect  to  all  those  populations  in  what- 
ever country  that  live  in  this  abject  condition,  that  they 
have  very  little  voice  in  determining  their  own  wages. 
Their  employers  have  it  all  their  own  way,  and  when 
they  find  that  the  wages  which  their  laborers  receive  are 
not  adequate  to  save  them  from  starvation,  the  employers 
themselves  yield  to  necessity  and  pay  higher  wages. 

It  is  therefore  true  that  in  all  cases  in  which  wages 
are  really  determined  by  competition,  //  is  the  cost  of  liv- 
ing and  not  the  cost  of  mere  necessaries  that  influences  the 
rate  of  wages.  If  it  is  not  possible  by  equitable  legisla- 
tion and  a  sound  and  healthy  intellectual  and  moral 
training  of  a  people,  to  secure  such  conditions  of  society 
that  all  wages  will  be  thus  determined,  the  outlook  to- 
ward the  future  of  the  civilized  world  is  gloomy  enough. 
We  shall  have  occasion  to  return  to  this  subject  in  a 
subsequent  chapter. 


CHAPTER   V. 


Causes  of  the  Variation  of  Wages  for  Particular 

Perso?is  and  Classes. 

§  130.  The  last  chapter  was  devoted  to  the  consid^ 
eration  of  the  general  causes  which  are  liable  to  produce 
variations  of  wages.  The  wages  however  received  by 
one  person  or  one  class  of  persons  are  found  to  differ 
very  greatly  from  those  of  another.     It  is  desirable  be- 


CAUSES    OF    VARIATION    OF    WAGES.  l8l 

fore  we  dismiss  the  subject  of  wages,  to  point  out  some 
of  the  leading  causes. 

One  of  the  most  important  of  these  causes  is  the  diver- 
sity of  men^s  natural  gifts.  There  are  some  products  of 
human  effort  which  are  held  in  the  highest  esteem  by  all 
civilized  men,  the  power  to  produce  which  is  possessed 
by  very  few  human  beings,  and  consequently  the  products 
themselves  are  always  rare.  The  men  possessing  those 
rare  endowments  are  able  to  demand  wages  that  are 
limited  only  by  the  desire  which  men  have  for  these 
peculiar  products,  and  the  wealth  of  the  community. 
Most  of  the  works  of  genius  are  to  a  greater  or  less  ex- 
tent embraced  in  this  class,  and  are  liable  in  favorable 
circumstances  to  command  prices  which  seem  almost 
fabulous. 

To  the  same  class  are  to  be  referred  the  extraordinary, 
profits  sometimes  realized  by  men  of  great  eminence  in  the 
professions.  It  is  because  their  abilities  are  so  rare  as  to 
place  them  quite  above  the  reach  of  competition.  They 
have  the  glorious  gift  of  genius  of  which  they  have  a 
natural  and  god-given  monopoly.  Their  services  in 
cases  involving  vast  amounts  of  property,  or  the  life  and 
health  of  persons  possessing  great  estates,  are  esteemed 
so  valuable,  that  men  will  pay  almost  any  price  for  them, 
rather  than  not  obtain  the  advantage  of  them.  We  are 
economists,  not  moralists,  and  therefore  have  nothing  to 
say  of  the  moral  responsibility  of  such  men.  They  enjoy 
a  precious  gift  of  the  Creator,  and  if  they  use  it  wisely, 
it  is  a  glorious  life  they  live. 

§  131.  Wages  are  higher  in  proportion  to  the  expense 
of  time  and  money  that  must  be  expended  in  acquiring  the 
skill  requisite  for  performing  services  of  which  they  are 
the  reward.  Much  labor  requires  no  peculiar  educa- 
tion at  all.  But  there  are  occupations  the  labors  of 
which  cannot  be  successfully  performed  without  an  ex- 


1 82  ECONOMICS. 

pensive  education  for  the  business.  Such  labor  must  be 
more  highly  compensated  than  that  which  requires  no 
such  preparatory  outlay.  If  any  community  refuses  to 
pay  such  superior  compensation,  if  one  can  get  no  re- 
muneration for  the  capital  expended  in  acquiring  such 
an  education,  no  one  will  be  at  the  expense  of  acquiring 
it,  and  the  community  will  soon  have  to  live  without 
educated  labor.  That  which  will  bring  nothing  in  ex- 
change will,  we  have  seen,  soon  cease  to  be  produced. 

The  degree  of  that  compensation  will  depend  directly 
oti  the  perfection  and  rarity  of  the  skill  acquired  and  brought 
into  use.  If  for  example  the  medical  profession  should 
fail  to  give  evidence  of  any  decided  superiority  in  the 
treatment  of  disease,  over  the  quack,  or  a  mere  nurse, 
people  would  be  willing  to  pay  very  little  for  professional 
skill.  But  the  physician  who  acquires  a  wide  reputation 
for  eminent  skill  in  administering  remedies  for  the  mala- 
dies to  which  men  are  liable,  will  find  an  enlightened 
public  willing  to  give  him  a  liberal  reward  for  his  services. 
The  principle  holds  here  as  everywhere  else,  that  the 
greater  any  man's  superiority  in  any  kind  of  labor  to  the 
rest  of  the  community,  the  higher  the  wages  he  can  de- 
mand iorx  his  labor,  and  the  more  other  men  can  afford 
to  give  him.  The  skilled  laborer  has  therefore  the 
greatest  possible  inducement  to  bring  his  skill  to  the 
highest  perfection,  and  what  is  for  his  interest  is  equally 
for  the  interest  of  the  whole  community.  Men  are  often 
envious  of  one  who  acquires  a  reputation  for  skill,  by 
which  he  is  able  to  command  very  large  compensation 
for  his  services.  This  is  illiberal  and  inconsiderate. 
The  only  reason  why  one  can  command  such  compensa- 
tion is,  that  men  find  that  his  services  are  still  cheap, 
even  at  the  price  he  demands  for  them. 

§  132.  Another  cause  of  wide  variation  in  the  rate 
of  wages  is  found  in  the  amount  of  confidence  reposed^ 


CAUSES   OF    VARIATION    OF    WAGES.  183 

Services  are  often  demanded  in  positions  in  which  not 
only  eminent  professional  or  mechanical  skill  is  requisite, 
but  wisdom,  sagacity,  soundness  of  judgment  in  estimat- 
ing men's  characters,  and  a  power  of  controlling  their 
passions  and  directing  their  wills,  and  above  all  unques- 
tionable moral  integrity  are  not  only  important  but  even 
indispensable.  Just  in  proportion  as  such  qualities  are 
regarded  as  desirable  in  any  position,  and  as  the  union 
of  them  all  is  rarely  found  in  one  person,  the  man  who 
possesses  such  a  combination  of  traits  will  command 
higher  wages  than  other  men.  The  world  is  not  so  bad 
in  any  civilized  country,  that  eminent  wisdom  and  high 
moral  integrity  are  without  value  in  the  market. 

It  is  however  true  that  many  positions  in  which  such 
qualities  are  esteemed  indispensable  confer  so  much  dig- 
nity and  honor  on  those  who  occupy  them,  and  give  such  ad- 
vantages of  social  position,  that  men  are  willing  to  accept 
them  at  a  lower  rate  of  compensation  than  they  could 
command  in  less  honored  situations.  For  example,  men 
of  the  highest  legal  attainments  and  personal  reputation 
will  often  consent  to  occupy  a  position  on  the  judge's 
bench  for  a  salary  much  smaller  than  the  income  they 
might  expect  to  receive  at  the  bar.  This  consideration 
explains  the  comparatively  low  salaries  received  by  some 
men  of  great  eminence.  The  reverence  and  affectionate 
homage  of  mankind  is  more  desirable  to  an  honorable 
and  generous  mind  than  money. 

§  133.  There  are  numerous  causes  affecting  in  many 
subtle  ways  the  wages  of  different  persons  and  classes^  which 
it  is  neither  possible  or  desirable  to  particularize.  One 
of  them  is  the  uncertainty  of  success  in  any  occupation. 
Men  will  encounter  that  uncertainty  only  because  they 
see  the  prospect  of  proportionally  higher  wages  in  case 
of  success.  The  wages  of  those  who  do  succeed  must 
be  high  enough  to  compensate  for  the  lost  labor  of  those 


184  ECONOMICS. 

who  fail.  Constancy  or  inconstancy  of  employment  in- 
fluences wages.  If  employment  is  irregular  or  uncertain 
men  must  be  paid  for  the  time  they  are  obliged  to  spend 
in  waiting  for  work.  The  ease  or  difficulty  of  the  ki:or, 
the  pleasantness  or  disagreeableness  of  the  occupation, 
have  a  good  deal  of  influence  on  wages.  Even  the  dis- 
gracefulness  of  an  occupation  is  sometimes  the  reason 
why  it  commands  large  pay.  Men  must  be  well  paid 
for  doing  dirty  work.  We  think  in  the  present  state  of 
public  opinion  in  this  country,  no  one  would  engage  in  the 
liquor  traffic,  who  did  not  expect  to  realize  large  gains. 

§  134.  There  are  certain  occupations  which  are  of  such 
a  character  that  large  classes  of  persons  are  disposed  to  en- 
gage in  them,  whose  constitutions,  tastes,  habits  aftd  educa- 
tion disqualify  them  for  most  other  avocations.  Of  course 
competition  in  these  occupations  is  very  strong,  and 
wages  are  proportionally  low.  If  one-half  of  the  human 
race  were  without  eyesight,  and  there  were  a  few  occupa- 
tions in  which  blind  men  could  succeed,  the  competition 
for  these  employments  would  be  exceedingly  strong. 
They  would  become  exclusively  employments  for  the 
blind,  for  wages  would  sink  to  so  low  a  point,  that  a 
comfortable  living  could  not  be  obtained  from  them. 
This  is  in  principle  precisely  the  case  of  the  suffering 
needle-women  alluded  to  in  a  former  chapter.  It  is  in 
place  here  to  resume,  as  we  promised  to  do,  the  consid- 
eration of  their  case,  and  we  shall  find  it  a  very  instruct- 
ive one.  The  causes  that  produce  the  starvation  prices 
at  which  seamstresses  are  often  compelled  to  work,  do 
not  at  once  meet  the  eye  of  the  public.  There  are  large 
classes  of  persons  in  every  civilized  community,  who 
never  enter  into  that  general  competition  by  which  wages 
are  determined.  The  competing  unit  is  to  a  great  extent,  not 
the  individual,  but  the  family.  The  male  head  of  the 
family  is  responsible  for  the  support  of  all  its  members, 


CAUSES   OF   VARIATION   OF   WAGES.  1 85 

and  buffets  the  wild  waves  of  competition  for  them  all 
by  his  single  personal  power  and  will.  The  women  of 
such  families  enjoy  a  sheltered  existence,  protected  from 
many  of  the  storms  that  beat  on  all  the  out-door  world. 
Yet  there  are  large  and  increasing  numbers  of  women 
who  are  not  thus  protected,  and  are  obliged  to  engage 
single-handed  in  the  rude  struggle  for  existence  which 
we  call  competition.  They  naturally  seek  those  occupa- 
tions which  do  least  violence  to  female  tastes  and  habits, 
and  are  most  suitable  to  the  delicacy  of  female  fingers. 
The  needle  is  apt  to  be  a  favorite  resort,  and  their  com- 
petition is  very  largely  thrown  upon  the  employment  of 
the  seamstress.  The  consequence  is  inevitable,  ruinously 
low  wages. 

But  the  evil  stops  not  here.  In  those  peaceful  homes 
where  so  many  Women  are  passing  their  tranquil  lives, 
there  are  many  who  are  painfully  conscious  of  the  lack 
of  sufficient  employment.  They  would  rather  earn  some- 
thing in  almost  any  agreeable  employment,  than  live  in 
idleness  and  earn  nothing.  It  is  not  necessary  for  them 
to  do  anything  for  their  own  support,  their  living  is  se- 
cure. But  they  would  like  to  be  a  little  independent  in 
their  spending  money.  They  are  therefore  glad  to  take 
in  sewing,  even  at  the  lowest  prices,  to  employ  their  un- 
employed hours,  and  therefore  enter  into  direct  competi- 
tion with  all  other  women  that  earn  money  with  their 
needles.  Women  whose  life  depends  on  the  7ieedle  Ji?id 
their  wages  depressed  by  the  competition  of  those  who  are 
not  working  for  a  living  at  all,  and  to  whose  comfort  in 
life  it  is  of  no  real  importance,  whether  they  receive  high 
wages  or  low.  It  is  surely  no  occasion  of  wonder,  that, 
in  a  struggle  so  unequal,  starvation  comes  to  the  woman 
who  must  not  only  live  by  her  needle,  but  perhaps  sup- 
port  children,  or  even  a  husband  disabled  by  disease,  or 
still  worse  by  vice. 


1 86  ECONOMICS. 

In  such  circumstances  as  these,  it  is  quite  useless 
and  childish  to  call  employers  by  hard  names,  or  de- 
nounce the  law  of  competition.  Employers  are  no  more 
deserving  of  censure  than  any  one  who  buys  and  wears 
their  cheap  made  clothing.  We  have  shown  that  they 
are  just  as  much  held  in  the  grasp  of  an  inexorable  law 
as  the  needle-women  themselves.  Nor  is  there  any 
occasion  to  denounce  that  law.  It  has  in  this  very  case 
performed  its  appropriate  function  faithfully  and  benefi- 
cently. It  has  afforded  the  clearest  possible  proof, 
that  these  women  are  seeking  a  living  where  it  cannot 
be  found,  and  that  they  ought  at  once  to  abandon  the 
needle,  and  seek  some  other  mode  of  employment. 

§  135.  This  case  clearly  reveals  the  fact,  that  there 
may  be  in  civilized  society  obscure  and  subtle  forces^  that 
exert  great  influence  on  wages,  which  at  first  thought  would 
hardly  be  suspected  of  sustaining  any  relation  to  the  subject. 
It  is  not  any  natural  necessity  which  concentrates  so 
great  a  force  of  female  competition  upon  this  one  occu- 
pation. There  are  modes  of  employment  for  which  many 
perhaps  most  of  the  needle-women  are  well  fitted,  that 
are  not  at  all  crowded,  and  in  which  they  would  receive 
wages  sufficient  to  support  them  in  comfort  and  happi. 
ness.  Such  an  employment  is  domestic  service.  But 
thousands  are  repelled  from  this  and  other  avocations 
which  are  quite  open  to  them,  by  fear  of  the  loss  of  social 
position.  Multitudes  of  women  would  rather  live  from 
day  to  day  at  their  needles  on  the  very  verge  of  starva- 
tion, than  engage  in  an  occupation  imagined  to  be  less 
socially  respectable  with  every  assurance  of  comfort  and 
plenty.  It  is  surely  desirable  that  all  classes  of  society 
should  be  educated  out  of  a  prejudice  so  silly  and  mis- 
chievous. 

We  cannot  forbear  remarking  in  this  place,  that  this 
is  one  of  the  points  at  which  our  science  necessarily  touchei 


CAUSES   OF   VARIATION    OF   WAGES.  187 

that  of  ethics.  The  great  multiplication  of  this  class  of 
women  among  us  is  largely  due  to  the  unsatisfactory 
condition  of  domestic  life.  Large  numbers  of  young 
men  of  the  finest  promise  are  quite  unfitted  for  domestic 
life  by  self-indulgent  vicious  habits,  and  therefore  never 
marry.  It  requires  no  great  skill  in  arithmetic  to  prove, 
that,  as  the  numbers  of  the  two  sexes  are  almost  pre- 
cisely equal  except  as  inequality  is  produced  by  emigra- 
tion or  other  accidental  and  transient  causes,  if  large 
numbers  of  men  live  in  celibacy,  an  equal  number  of 
women  are  sure  to  fail  of  obtaining  their  natural  protec- 
tion and  support  in  domestic  life.  The  number  of 
women  compelled  to  engage  single-handed  in  the  strug- 
gle for  existence  is  thereby  greatly  increased.  This  is 
becoming  an  enormous  evil  in  American  society.  Many 
writers  on  economics  lay  a  great  deal  of  stress  on  the 
imprudent  marriages  of  the  poor.  We  are  not  disposed 
to  enter  into  any  controversy  with  them  on  that  subject, 
but,  in  a  true  view  of  the  matter,  our  science  has  more 
and  stronger  words  to  say  against  that  vicious  celibacy, 
by  which  thousands  utterly  fail  to  discharge  their  duty 
as  the  natural  supporters  and  protectors  of  women. 
American  society,  American  economy  is  suffering  a  great 
deal  more  from  vicious  celibacy  than  from  imprudent 
marriages. 

§  136.  The  aid  of  our  science  will  be  invoked  in  vain  by 
those  who  at  the  present  time  are  clamoring  for  the  abolition 
of  that  protectorate  of  women^  which  was  alluded  to  in  a 
previous  section.  It  is  one  of  the  wise  provisions  of  the 
human  constitution,  by  which  man  willingly  bears  the 
severer  and  ruder  toils  and  struggles  of  life,  in  order 
that  woman  may  be  sheltered  in  the  tranquil  seclusion 
of  home,  and  perform  in  greatest  perfection  her  great 
function  of  rearing  up  in  long  succession  the  generations 
of  men,  that  are  to  bear  forward  civilization  towards  its 


1 88  ECONOMICS. 

highest  perfection ;  that  when  the  parents  pass  away,  the 
children  may  be  prepared  to  take  their  places,  stronger 
in  all  that  constitutes  the  highest  humanity,  than  those 
who  have  gone  before  them.  Division  of  labor  is  true 
economy,  the  more  perfect  the  division  the  more  perfect 
the  economy.  The  progress  of  civilization  will  not  dis- 
pense with  this  most  primitive  and  most  necessary  of  all 
divisions  of  labor,  but  will  cultivate  both  parties  in  it  up 
to  the  highest  possible  adaptation  to  their  respective 
functions. 

§  137.  There  is  at  the  present  time  an  uneasy  feeling 
in  many  minds,  growing  out  of  the  suspicion,  that  then 
is  some  misadjustment  of  the  economic  system^  whereby 
women  are  deprived  of  their  7iatural  share  of  the  products 
of  industry.  It  is  one  of  the  numerous  cases  in  which 
restless  spirits  seek  to  relieve  themselves  by  denouncing 
and  censuring  somebody,  without  being  at  the  trouble 
first  candidly  to  inquire,  whether  anybody  is  censurable, 
or  if  anybody,  who  and  for  what.  It  is  claimed  that  when 
women  do  the  same  work  as  men  and  do  it  as  well,  they 
ought  to  receive  the  same  pay.  The  very  form  of  this 
proposition  shows,  that  the  person  who  affirms  it  is  look- 
ing at  the  ethical  and  not  at  the  economical  view  of  the 
subject.  ^'  Ought "  belongs  not  to  economics.  It  is  our 
business  as  economists  to  inquire  what  is  the  natural 
law  which  determines  woman's  wages.  It  will  not  take 
long  to  discover,  that  it  is  the  same  law  of  competition 
that  determines  all  other  wages.  We  have  demonstrated 
the  universality  of  this  law.  Is  there  then  some  arbi- 
trary and  artificial  adjustment  of  the  economic  machinery 
of  the  world,  by  which  the  law  of  competition  has  been 
made  to  bear  unfairly  on  women  ?  This  is  claimed,  per- 
haps in  some  cases  justly.  It  may  be  that  law  in  a  few 
instances,  and  custom  in  more,  may  have  shut  out  women 
from  competing  for  wages,  in  modes  of  employment  in 


CAUSES    OF    VARIATION    OF    WAGES.  189 

which  they  might  have  had  a  fair  prospect  of  success. 
Whatever  obstacles  of  this  sort  may  have  existed,  we 
are  not  disposed  to  defend  them,  and  they  are  certainly 
assailed  by  forces  which  must  sweep  them  away.  If 
women  have  not  had  a  fair  chance,  they  are  sure  to  have 
it  soon.  But  a  thoughtful  person,  whether  man  or 
woman,  will  surely  not  fail  to  see,  that  the  organization 
of  the  sexes,  their  constitution  both  of  body  and  mind  is 
such,  that  women  will  always  enter  the  arena  of  competi- 
tion for  the  prizes  which  labor  wins,  under  great,  una- 
voidable, natural  disadvantages,  and  that  consequently 
in  the  labor  markets  of  the  world,  there  will  be  one  rate 
for  men  and  another  for  women.  It  is  with  this  great 
stubborn  natural  fact,  that  we  as  economists  are  com- 
pelled to  deal.  He  who  demands  that  in  this  struggle 
female  muscles  and  sinews,  female  force  and  endurance 
shall  command,  or  if  he  prefers  to  say  so,  ought  to  com- 
mand as  high  wages  as  those  of  the  other  sex,  has  en- 
gaged in  a  desperate  struggle  with  the  laws  of  nature, 
and  we  must  leave  him  to  manage  his  case  as  well  as  he 
can.  To  us  it  seems  quite  desperate.  We  would  really 
advise  him  to  give  it  over  at  once,  for  we  think  he  is  sure 
to  be  vanquished  at  last.  It  really  does  seem  to  us,  that 
from  the  very  organization  of  the  sexes  man's  labor  will 
always  rate  higher  in  the  market  than  woman's,  and  that 
eloquent  denunciations  will  really  accomplish  very  little 
towards  making  it  otherwise. 

At  the  same  time  it  would  be  very  difficult  to  show, 
ihat^  at  least  in  all  ordinary  cases ^  women  do  not  receive  the 
same  wages  as  men,  when  they  do  the  same  work  and  do  it 
as  well.  For  example,  if  one  wants  to  employ  two  teachers 
in  the  same  school,  one  male  and  one  female,  he  will 
certainly  offer  much  higher  wages  for  the  former  than 
for  the  latter.  The  reason  why  he  will,  is  that  he  knows 
that  by  the  law  of  competition  he  can  obtain  the  services 


19©  •  ECONOMICS. 

of  a  woman  at  much  lower  wages  than  he  must  pay  for  a 
man.  But  why  does  he  employ  the  man  at  all  ?  Why 
not  two  female  teachers  instead  of  one  man  and  one 
woman  ?  Evidently  because  he  expects  service  from  one 
of  them,  which  a  woman  cannot  so  well  perform.  He 
does  not  offer  the  woman  lower  wages  than  the  man,  with 
the  expectation  that  she  will  perform  the  same  service, 
but  with  the  distinct  intention,  that  the  man  shall  do 
that  which  will  not  be  expected  of  the  woman.  Since 
he  wants  a  man's  work,  he  sees  the  necessity  of  offering 
a  man's  wages. 

§  138.  Is  it  asked  why  not  place  male  and  female 
teachers  at  once  on  the  same  basis  of  pay  ?  We  answer 
a  law  of  nature  forbids  it,  renders  it  impossible,  just  as 
was  demonstrated  in  a  previous  chapter  in  respect  to  the 
wages  of  needle-women.  To  offer  man's  wages  for  the 
place  that  was  to  be  occupied  by  a  female  teacher  would 
be  a  grievous  injury  to  all  women  well-qualified  for  the 
place,  who  would  gladly  perform  the  service  desired  for 
wages  determined  by  competition.  Teaching  is  one  of 
those  occupations  upon  which  the  competition  of  women, 
obstructed  and  shut  out  by  natural  disadvantages  from 
many  other  modes  of  employment,  will  be  concentrated 
in  great  force.  Wages  will  therefore  be  inevitably  de- 
pressed. Eloquent  men,  and  perhaps  still  more  eloquent 
women  may  declaim  against  it,  and  produce  any  amount 
of  commotion  in  the  popular  mind,  but  they  cannot  help 
it.  It  is  a  law  of  nature  they  are  resisting,  and  no  elo- 
quence can  prevail  against  it.  If  a  woman  is  wanted 
for  a  teacher  of  children  and  youth,  competition  will 
make  her  wages  low.  If  you  want  something  done  in 
the  school-room  which  you  suppose  a  woman  cannot  so 
well  do,  and  therefore  think  it  necessary  to  employ  a  man, 
then  you  must  pay  him  as  much  as  he  could  obtain  in  other 
employments,  where  equal  skill  and  talent  are  required 


CAUSES    OF   VARIATION    OF    WAGES.  I9I 

In  dealing  with  this  question  of  woman's  wages,  it  is 
a  grievous  wrong  to  woman  to  forget,  that  in  her  high 
and  God-appointed  function,  the  best  and  noblest  ser- 
vices she  ever  performs  for  the  world,  are  high  above  all 
commercial  valuation,  and  are  performed  in  such  rela- 
tions to  domestic  society,  that  her  own  proper  reward  is 
secured  to  her,  without  entering  the  arena  of  competition 
for  wages.  Those  who  forget  this  are  not  the  true  friends 
of  women. 

§  139,  We  have  dwelt  the  longer  on  this  subject  of 
woman's  wages,  partly  because  the  public  mind  is  mor- 
bidly excited  on  the  subject,  and  greatly  needs  to  see  it 
in  the  clear  light  of  scientific  analysis,  and  also  because 
it  forcibly  illustrates  some  of  the  most  important  princi- 
ples of  the  general  subject  of  wages.  The  suggestions 
which  have  been  made  in  the  two  previous  sections  are 
capable  of  a  very  wide  application.  The  principal  func- 
tion of  competition  undoubtedly  is  to  determine  price. 
But  that  is  not  its  only  function.  It  is  in  most  cases  the 
safest  guide  one  can  have  as  to  the  occupation  which  hi 
should  pursue.  There  are  many  persons  whose  life  is  in 
a  great  measure  a  failure,  because  they  will  not  follow 
its  indications.  When  one  has  found  that  in  any  given 
employment  he  cannot  obtain  for  his  services  a  living 
compensation,  he  ought  to  regard  it  as  a  clear  indication 
that  he  has  mistaken  his  calling,  and  to  seek  some  other 
method  of  serving  his  generation.  This  remark  is  appli- 
cable to  many  men  who  have  attempted  professional  life, 
but  cannot  succeed  in  it.  One  should  assume  that  he 
was  not  made  in  vain,  and  therefore  if  he  cannot  succeed 
in  one  thing  he  should  try  another. 

JVe  would  even  apply  this  principle  to  those  who  havt 
undertaken  the  sacred  fufiction  of  the  Christian  ministry. 
We  apply  it  here  however  under  a  very  grave  limitation. 
Men  do  not  always  value  most  that  which  is  most  pre 


192  ECONOMICS. 

cious  and  most  needful  to  them.  There  are  cases  in 
which  the  noblest  thing  a  man  can  do  is,  to  spend  his 
life  in  rendering  services  to  mankind  which  they  do  not 
appreciate  and  will  not  reward.  If  a  Christian  minister 
finds  that  he  does  succeed  in  rendering  such  service  to 
mankind,  by  promoting  their  moral  and  spiritual  inter- 
ests, let  him  never  abandon  his  high  function  on  account 
of  the  scantiness  of  his  pecuniary  reward.  But  if  on  the 
other  hand  he  finds  that  his  labors  in  the  ministry  fail  to 
yield  him  a  support  for  himself  and  those  dependent  on 
him,  and  yet  sees  no  satisfactory  evidence,  that  his  labors 
are  successful  as  a  preacher  of  righteousness  and  an 
advocate  of  the  highest  moral  and  spiritual  truth,  he  is 
quite  at  liberty  to  serve  God  and  his  generation  in  some 
other  occupation. 


CHAPTER  VI. 
Ownership  of  Land, 


%  140.  Having  considered  the  various  phenomena  of 
wages,  it  would  seem  appropriate  that  we  next  proceed 
to  the  examination  of  the  remaining  branch  of  Distribu- 
tion, the  share  of  the  gains  of  production  which  falls  to 
capital.  But  a  preliminary  question  will  first  demand 
our  attention.  The  received  method  of  treating  the  sub- 
ject recognizes  three  parties  between  whom  the  proceeds 
of  production  are  to  be  divided,  viz.,  land-owners,  labor- 
ers and  capitalists.  We  have  recognized  but  two  parties 
viz.,  laborers  and  capitalists,  and  have  proposed  to  regard 
land  as  fixed  capital  and  rent  as  the  profit  of  it.     Before 


OWNERSHIP   OF    LAND.  I93 

we  proceed  further  we  must  assign  our  reasons  in  justi- 
fication of  this  division  of  the  subject.  For  this  purpose 
it  will  be  necessary  to  examine  a  question  not  generally 
regarded  as  belonging  to  the  science, — the  nature  and 
foundation  of  property  in  land.  It  seems  to  us  that  the 
want  of  a  correct  understanding  of  this  subject  has  led 
to  an  erroneous  theory  of  rent,  and  rendered  men's 
minds  tolerant  of  violations  of  fundamental  economic  law 
in  regard  to  the  tenure  of  land,  which  would  otherwise 
seem  unendurable.  The  discussion  of  this  question  is  also 
necessary  in  order  to  justify  the  position  taken  by  us  in 
the  preliminary  chapter  of  this  treatise,  that  no  owner- 
ship of  any  material  thing  can  be  acquired,  except  by 
human  labor  bestowed  upon  it,  whereby  it  is  rendered 
capable  of  being  serviceable  to  man.  We  shall  therefore 
devote  this  chapter  to  a  consideration  of  the  ownership 
of  land. 

§  141.  Undoubtedly  the  first  aspect  of  this  question, 
is,  that  in  the  arrangements  of  nature,  land,  like  the 
water  of  oceans,  lakes  and  rivers,  or  the  atmosphere 
which  envelopes  us  all,  is  the  free  gift  of  the  Creator  to 
all  men  alike,  and  can  be  the  property  of  no  one.  There 
are  perhaps  not  a  few  who  so  regard  it  at  the  present 
time,  and  nourish  in  their  souls  an  ever  glowing  sense  of 
injustice  at  what  they  regard  as  the  unjustifiable  monop- 
oly of  the  private  ownership  of  land.  It  becomes  there- 
fore necessary  for  us  clearly  to  point  out  the  foundation  of 
the  private  ownership  of  land  in  some  incontrovertible 
natural  law,  or  submit  to  a  most  radical  economic  revolu- 
tion. There  is  not  a  question  which  the  economist  is 
imder  a  more  imperative  necessity  of  examining.  If  the 
private  ownership  of  land  is  not  the  clear  and  inevitable 
result  of  natural  law,  it  cannot  be  permanently  sustained 
as  a  law  of  society  arbitrarily  established  and  enforced. 
In  this  as  in  all  other  sciences,  the  laws  of  nature  and 
9 


194  ECONOMICS. 

all  their  legitimate  consequences  will  remain  forever,  all 
else  will  be  swept  away. 

In  the  first  chapter  of  this  treatise,  it  was  enunciated 
as  the  fundamental  law  of  the  science,  that  every  man 
owns  himself  and  all  which  he  produces  by  the  exertion 
of  his  powers.  It  was  also  stated  as  a  consequence  of 
this  law,  that  when  any  man  expends  his  labor  upon  a 
material  substance  which  he  has  received  as  the  gift  of 
God,  no  human  labor  having  been  previously  exerted 
upon  it,  by  expending  his  labor  upon  it,  he  becomes  the 
owner  of  the  material  thing  which  by  his  labor  he  has 
made  capable  of  gratifying  human  desire.  If  for  example 
one  finds  a  tree  in  some  primeval  forest  to  which  no  one 
has  established  any  previous  claim,  cuts  it  down,  and 
fabricates  it  into  articles  of  beauty  or  utility,  his  labor 
expended  on  it  makes  him  the  owner  of  the  wood,  in 
order  that  he  may  enjoy  the  benefit  of  the  labor  he  has 
expended  on  it. 

§  142.  A  more  attentive  comparison  of  air,  water  and 
land  will  show,  that  the  last  of  the  three  is  distinguished 
from  the  other  two  by  a  most  remarkable  difference.  The 
two  first  mentioned  require  no  modification  by  human 
effort  to  fit  them  for  man's  use.  The  condition  of  the  air 
cannot  be  rendered  more  fit  for  human  lungs  than  it  is. 
It  always  envelopes  us  ready  for  our  use.  Nothing  which 
man  can  do  will  improve  either  its  quantity  or  its  quality. 
All  we  can  do  in  respect  to  it,  is  to  see  to  it  that  we  do 
not  shut  ourselves  out  from  its  free  circulation  in  its  own 
primitive  perfection.  Man  cannot  improve  the  atmos- 
phere by  any  efforts  of  his,  and  therefore  he  cannot 
own  it. 

The  same  is  true  of  water  as  it  exists  in  oceans,  lakes 
and  rivers.  No  man  can  make  the  clear  water  of  Lake 
Michigan  his  own.  If  water  can  only  be  obtained  by 
digging  a  well  at  much  expense  of  human  labor,  he  who 


OWNERSHIP    OF    LAND.  I95 

digs  the  well  owns  the  water.  This  has  been  held  to  be 
true  ever  since  the  days  of  Abraham  and  Lot.  It  ts 
recognized  even  among  the  wild  wanderers  of  the  desert. 
The  water  of  the  Mississippi  cannot  be  owned,  though 
he  that  has  placed  it  in  barrels,  and  carried  it  to  families 
living  at  a  distance  from  the  river  may  obtain  compensa- 
tion for  it. 

But  land  differs  widely  in  this  respect  both  from  air 
and  water.  Of  itself  in  its  natural  state  it  supplies  no 
want  of  man.  It  can  only  be  made  to  afford  human 
sustenance  by  being  subdued  and  cultivated.  In  its 
natural  state  it  is  as  useless  as  the  tree  growing  in  the 
primeval  forest.  It  supports  game,  and  that  is  the  prop- 
erty of  any  one  that  can  capture  it.  By  capturing  it, 
the  huntsman  acquires  the  ownership  of  it  but  not  of  the 
land  on  which  it  grazed,  and  over  which  it  ran.  Untilled 
land  produces  wild  fruits,  and  he  who  gathers  them,  owns 
them,  but  not  the  soil  on  which  they  grow.  If  land 
could  only  minister  to  human  well-being  by  its  spontane- 
ous productions,  it  could  no  more  be  subjected  to  owner- 
ship, than  the  oceans  or  the  great  lakes. 

Portions  of  the  ocean  are  subjected  to  national  ownership 
by  the  outlay  of  labor  and  capital  by  which  they  are  ren- 
dered capable  of  being  navigated  in  safety.  That  por- 
tion of  the  ocean  adjacent  to  the  land,  where  buoys  are 
established,  light-houses  built  and  sustained,  and  chan- 
nels leading  into  harbors  are  improved,  is  recognized  as 
belonging  to  the  government  that  makes  these  outlays 
of  labor  and  capital  upon  it.  The  principle  for  which 
we  contend  is  recognized  even  in  respect  to  water,  wher- 
ever it  is  possible  to  apply  it.  For  the  most  part  how- 
ever man's  labor  can  make  no  modification  of  the  ocean 
by  which  he  could  appropriate  it. 

§  143.  But  he  that  subdues  the  land,  destroys  the 
forests  that  shade  it,  or  any  other  spontaneous  vegetation 


196  ECONOMICS. 

that  hinders  the  growth  of  food  for  man,  and  tills  and 
sows  it,  acquires  the  ownership  of  it^  just  as  of  any  other 
natural  substance,  which  by  his  labor  he  renders  sub- 
servient to  human  uses.  Two  men  are  rambling  together 
among  the  fastnesses  of  the  Rocky  Mountains.  One  of 
them  discovers  a  tree  of  rare  fitness  for  the  manufacture 
of  articles  of  beauty,  and  by  his  labor  bestowed  on  it  he 
makes  it  his.  The  othe^:  discovers,  in  those  regions  of 
almost  universal  barrenness,  a  tract  of  land  capable  of 
abundant  productiveness.  He  removes  from  it  the  wild, 
luxurious  but  useless  growths  of  nature,  draws  water  from 
the  mountain  stream  that  rushes  along  its  border,  and 
thus  provides  for  its  perpetual  irrigation,  encloses  it 
against  the  incursions  of  animals,  and  plows  and  sows  it. 
This  man  owns  the  land  by  the  same  natural  title  by 
which  the  other  owns  the  tree  which  he  cut  from  the 
original  forest.  No  man  can  show  any  distinction  in 
principle  between  these  two  titles.  In  both  cases  alike 
we  recognize  the  only  ownership  which  man  can  acquire 
of  anything  which  God  has  made.  Man  enters  on  all 
land  by  the  same  process.  Land  on  which  no  human 
labor  has  been  bestowed  yields  nothing  to  human  well- 
being.  All  its  availability  for  this  purpose  is  dependent 
on  conditions  which  human  labor  alone  furnishes. 

It  may  perhaps  be  said,  that  in  the  case  just  supposed 
the  man  that  first  plowed  and  planted  the  land  would  be 
entitled  to  gather  the  harvest  which  he  has  sown,  but  no 
more.  This  is  certainly  untenable.  The  labor  which  he 
has  expended  upon  it  has  no  exclusive  reference  to  that 
one  harvest,  but  is  a  permanent  preparation  for  every 
future  crop,  and  he  will  be  the  same  absolute  owner  of 
it  at  the  end  of  the  year  as  at  the  beginning.  A  single 
crop  will  by  no  means  compensate  him  for  his  labor. 
He  has  conferred  on  it  the  capability  of  being  a  perma- 
nent instrument  of  human  well-being,  and  that  capabilit) 


OWNERSHIP    OF    LAND.  I97 

by  the  law  of  nature  he  owns.  He  will  stand  in  the  same 
relationship  to  it  at  the  end  of  any  number  of  years,  as 
when  he  planted  the  first  crop.  If  he  continues  to  keep 
that  land  in  a  state  of  fitness  for  cultivation,  the  time 
will  never  come,  when  he  or  the  person  to  whom  he  has 
transmitted  his  title,  will  not  be  by  nature's  law  the  one 
only  owner  of  it. 

§  144.  It  will  then  be  asked  what  is  the  origin  of  that 
ownership  of  new  lands  which  the  first  settler  buys  from  the 
goverjiment?  How  is  the  government  the  owner  ?  The 
common  idea  is  perhaps,  that  the  savage  tribes  that 
roamed  over  North  America  when  the  Europeans  came 
to  it,  were  the  owners  of  the  soil,  and  that  our  present 
government  owns  it  by  having  purchased  this  title  by 
treaty.  We  cannot  regard  this  view  of  the  matter  as  at 
all  tenable.  We  cannot  admit,  in  the  first  place,  thai 
these  savages  ever  did  own  the  soil.  They  never  did  that 
which  alone  creates  ownership.  They  never  made  any 
modification  of  the  land  by  labor  expended  on  it,  which 
fitted  it  to  be  an  instrument  of  production.  They  roamed 
over  it  like  the  herds  of  buffalo,  and  lived  on  its  spon- 
taneous products,  just  as  the  wild  beast  did.  But  by  so 
doing  neither  the  buffalo  nor  the  savage  acquired  owner- 
ship, the  latter  no  more  than  the  former.  He  that  gathers 
blackberries  or  shoots  deer  on  a  piece  of  ground  does 
not  become  the  owner  of  it.  No  one  owns  a  tree  of  the 
forest  because  on  a  single  year,  or  for  many  successive 
years,  he  gathered  the  nuts  that  grew  on  it.  The  Eu- 
ropean settlers  of  North  America  took  possession  of  no 
capabilities  of  production,  which  the  labor  of  those  sav- 
age tribes  had  created.  As  those  savages  retired  before 
them,  they  had  exactly  the  same  labor  to  perform  which 
they  would  have  had  if  there  had  never  been  any  human 
inhabitants  of  the  continent  before  them.  In  this  respect 
the  case  was  exactly  the  same,  that  it  would  have  been 


198  ECONOMICS. 

if  wild  beasts  only  and  not  men  had  retired  before  them. 
What  they  took  possession  of  everywhere  was  the  work 
of  the  Creator,  and  not  the  work  of  man.  The  assump- 
tion that  these  savage  tribes  were  the  owners  of  the  soil 
is  therefore  without  any  foundation  at  all,  and  the  influ- 
ence which  it  has  exerted  on  the  literature  of  Christen- 
dom, and  on  our  policy  toward  the  Indian,  is  exceedingly 
to  be  deplored. 

§  145.  Nor  again  are  these  tribes  independent  nations. 
Nationality  implies  a  defined  national  domain,  laws,  in- 
stitutions, a  stable  government,  able  to  give  substantial 
guarantees  for  the  fulfillment  of  its  part  of  any  treaty 
stipulations.  Every  treaty  we  have  ever  made  with  the 
Indian  has  been  at  two  points  radically  void.  On  the 
one  hand  the  Indian  was  not  the  owner  of  that  which 
both  parties  made  believe  he  sold  to  us:  he  had  no  title 
and  could  therefore  give  none.  On  the  other  hand,  we 
stipulated  to  do  that  which  the  nature  of  the  case  made 
it  certain  we  could  not  do.  We  guaranteed  to  the  Indian 
the  perpetual  possession  of  the  hunting  grounds  to  which 
he  retired.  It  is  devoutly  to  be  hoped  our  government 
will  never  make  any  more  such  promises  to  the  Indian, 
except  on  condition  of  his  becoming  a  civilized  tiller  of 
the  soil.  Without  that  condition  the  whole  power  of  our 
government  cannot  fulfill  such  a  promise.  There  is  a 
higher  law  than  any  human  government  can  enact,  that 
predestines  the  soil  of  North  America,  not  to  be  hunt- 
ing grounds  for  any  horde  of  savages,  but  to  yield  all  its 
resources  of  whatsoever  kind  to  the  ends  of  civilized 
humanity.  Assign  to  any  Indian  tribe  any  spot  you 
please,  if  the  Indian  uses  it  as  a  mere  hunting  ground, 
you  cannot  make  him  the  owner  of  it.  God  does  not 
give  ownership  of  this  earth  in  that  way,  and  you  can  not. 
While  it  is  held  only  for  such  a  barbarous  use,  civiliza- 
tion in  its  progress  over  the  continent  will  discover  its 


OWNERSHIP   OF   LAND.  1 99 

resources  which  no  savage  can  ever  develop,  and  will 
demand  and  obtain  its  own ;  and  no  treaty  which  any 
government  can  make  can  doom  those  resources  to  per- 
petual uselessness,  that  a  horde  of  savages  may  perpetu- 
ate their  barbarous  life.  The  law  by  which  civilized 
man  is  to  increase  and  replenish  the  earth  will  always 
prove  to  be  superior  to  any  claim  which  savages  can  set 
up  to  their  hunting  grounds,  and  any  treaty  which  a  great 
civilized  nation  may  make  with  a  savage  tribe  in  disre- 
gard of  that  law  is  a  solemn  farce,  the  pretense  of  mak- 
ing which  is  a  crime,  not  the  yielding  to  an  inevitable 
natural  necessity  of  permitting  it  to  be  broken. 

§  146.  If  we  are  asked  what  we  will  do  with  the 
Indian^  that  is  a  question  which  does  not  belong  to  our 
science,  we  must  turn  it  over  to  the  Christian  moralist 
and  statesman.  All  we  are  concerned  with  at  present  is, 
to  set  aside,  and  disabuse  men's  minds  of  the  notion 
that  our  title  to  our  lands  originated  in  purchase  from 
savage  tribes,  who  never  did  that  which  our  science  must 
regard  as  creating  the  only  possible  ownership.  One 
word  however  we  must  say  of  the  treatment  of  the  In- 
dian, to  protect  ourselves  from  misconception.  The 
European  occupants  of  North  America  should  have 
always  treated  the  Indians  as  men,  to  be  protected  in  all 
their  rights,  to  be  restrained  by  any  necessary  exertion 
of  force  from  doing  wrong,  and  to  be  encouraged  by  all 
practicable  means,  to  forsake  their  savage  life,  and  adopt 
the  habits  and  accept  tlie  blessings  of  civilization.  Give 
the  Indian  every  thing  to  encourage  him  in  his  efforts  to 
live  a  civilized  life,  nothing  to  aid  him  in  perpetuating 
his  barbarism.  Oi^r  policy  toward  the  Indian  has  so 
long  been  constmcted  on  a  false  assumption,  that  it  may 
be  no  easy  matter  at  this  late  day  to  return  to  sound 
principles  in  our  treatment  of  him.  We  trusi  however 
that  it  is  not  quite  impossible. 


zoo  ECONOMICS. 

§  147.  From  this  inevitable  digression,  we  return  c 
the  question,  what  is  the  origin  of  that  title  which  the  set- 
tler buys  from  the  government  ?  We  answer  it  is  the 
title  to  these  lands  which  the  government  has  acquired, 
by  surveying  them  into  convenient  parcels,  and  marking 
them  out  by  metes  and  bounds,  whereby  every  man  can 
identify  the  farm  he  has  purchased,  and  be  saved  from 
all  disputes  with  his  neighbors  about  boundaries,  by 
extending  over  them  the  jurisdiction  of  a  civilized  govern- 
ment, thus  rendering  life  and  property  in  a  great  meas- 
ure secure  from  the  very  origin  of  the  settlements,  and 
by  affording  to  the  inhabitants  of  the  remotest  frontier, 
protection  from  the  incursions  of  savages.  These  helps 
provided  by  the  government  for  the  bold  pioneers  of 
civilization  are  very  cheaply  purchased,  by  paying  the 
price  which  the  government  exacts  for  the  fee  simple  of 
the  lands.  Previous  to  the  entry  of  the  government  on 
these  lands,  by  making  such  provisions  as  these  for  the 
benefit  of  the  future  settler,  they  were,  like  the  rivers  that 
water  them  and  the  atmosphere  that  overlies  them,  with- 
out an  owner.  By  entering  on  them  and  making  these 
necessary  provisions  for  civilized  colonization,  the  gov- 
ernment became  the  owner,  and  conveys  its  ownership 
to  the  individual  purchaser. 

As  to  the  question,  by  what  title  the  United  States 
claim  the  right  to  enter  on  certain  lands,  and  acquire  the 
ownership  of  thein  in  the  manner  described  above,  rather 
than  England  or  any  other  foreign  power,  it  does  not 
belong  to  us  to  discuss  it.  That  question  does  not  re- 
late to  the  ownership  of  the  soil,  but  only  to  the  right  of 
political  jurisdiction,  and  depends  on  certain  arbitrar;^ 
understandings  entered  into  by  the  civilized  nations  of 
the  world^  rather  than  on  any  clearly  defined  natural  law 
It  belongs  therefore  to  the  writers  on  international  law 
and  not  to  us. 


OWNERSHIP   OF    LAND.  20I 

§  148.  It  may  perhaps  be  objected  to  this  view  of 
the  nature  of  o^x\t,x^\\v^^  that  the  labor  originally  expendea 
in  bringing  land  into  cultivation  is  greatly  overpaid  by  per- 
petual ownership.  It  must  be  admitted  that,  in  some 
cases,  it  does  seem  to  receive  a  very  high  compensation. 
In  view  however  of  all  the  facts  this  is,  even  in  these 
cases,  more  apparent  than  real.  When  the  land  pos- 
sesses great  natural  productive  power,  and  the  labor  re- 
quired to  subdue  it  is  comparatively  small,  the  outlay 
necessary  to  constitute  ownership  is  largely  rewarded  by 
the  value  of  the  permanent  possession.  But  it  should 
be  borne  in  mind,  that  this  outlay  is  often  made,  when 
the  interest  on  money  is  not  less  than  6ve  per  cent  per 
month,  and  consequently  one  hundred  dollars  is  equiva- 
lent to  one  thousand  dollars  in  ordinary  circumstances. 
Besides  it  should  not  be  forgotten  that  the  beginnings  of 
civilized  cultivation  often  involve  exposure  to  many  hard- 
ships and  perils,  for  which  it  is  very  reasonable  that  the 
first  settler  should  receive  compensation. 

Nor  is  it  by  any  means  generally  true  that  the  labor 
expended  in  acquiring  the  oumership  of  new  land  is  very 
largely  rewarded.  We  suspect  it  would  be  difficult  to 
find  a  well-informed  man  who  believes,  that  the  present 
market  value  of  the  lands  of  the  United  States  at  all  ex- 
ceeds the  actual  cost  of  subduing  them,  and  bringing 
them  into  their  present  state  of  cultivation,  or  in  other 
words,  that  the  present  rental  of  the  whole  country  ex- 
ceeds interest  at  current  rates  on  the  cost  of  improve- 
ments. It  is  probably  impossible  ever  to  obtain  any 
answer  to  the  question  we  here  raise,  which  would  be 
even  proximately  accurate.  But  there  is  certainly  a  great 
deal  of  cultivated  land  in  this  country,  the  annual  rental 
of  which  would  fall  very  greatly  below  current  interest  on 
the  cost  of  improvements  made  on  it.  If  there  is  also  a 
good  deal  of  land  the  rental  of  which  would  exceed  the 


202  ECONOMICS. 

interest  on  the  cost  of  improvements,  that  affects  not  the 
question  before  us.  Land  is  by  no  means  the  only  ex- 
ample of  a  material  substance  of  which  ownership  has 
been  acquired  by  labor  expended  on  it,  the  value  of  which 
greatly  exceeds  the  value  of  the  labor  so  expended.  A 
gold  hunter  opens  a  mine  and  finds  gold  in  paying  quanti- 
ties. In  virtue  of  the  labor  of  opening  it,  he  owns  it 
with  all  the  riches  which  it  contains,  no  matter  how  vast 
the  sum.  If  by  a  fortunate  effort  of  ingenuity  one  in- 
vents a  machine  for  which  the  world  will  willingly  pay 
him  millions,  he  is  entitled  to  those  millions,  and  may 
refuse  to  disclose  his  secret,  except  for  value  received. 
A  man  may  be  equally  fortunate  in  laying  claim  to  a 
piece  of  land  by  bestowing  labor  upon  it.  Many  have 
been  thus  fortunate,  but  this  by  no  means  sets  aside  the 
principle,  that  the  ownership  of  any  material  thing  which 
the  Creator  has  made,  is  obtained  only  by  labor  bestowed 
ujDon  it,  whereby  it  becomes  capable  of  supplying  human 
want.  It  is  nothing  different  from  what  occurs  in  rela- 
tion to  all  other  material  possessions,  where  the  princi- 
ple is  confessedly  applicable. 

§  149.  There  is  one  other  objection  to  this  doctrine  which 
to  some  persons  may  seem  weighty.  It  must  be  owned 
that  land  has  one  seeming  peculiarity,  distinguishing  it 
from  most  other  kinds  of  property.  It  is  very  likely  to 
be  enhanced  in  value  by  the  progress  of  population, 
wealth  and  civilization,  without  the  expenditure  of  any 
additional  labor  in  its  improvement.  That  there  is  such 
a  general  tendency  cannot  be  denied.  Yet  the  facts  are 
after  all  by  no  means  uniform.  With  the  steady  growth 
of  some  of  the  New  England  states  in  all  the  elements  ot 
civilization,  within  the  last  fifty  years,  a  large  portion  of 
their  land  has  greatly  declined  in  price,  instead  of  ad- 
vancing, as  this  general  statement  would  imply.  The 
investments  made  fifty  years  ago  in  improving  it  have 


OWNERSHIP   OF    LAND.  203 

proved  as  bad  as  those  in  some  other  parts  of  the  country 
have  been  good.  When  a  man  lays  out  his  labor  on  a 
piece  of  land,  and  takes  the  land  as  his  reward,  he  does 
not  know  that  the  community  around  it  will  advance  in 
civilization.  It  may  decline.  In  that  case  his  invest- 
ment will  be  a  loss  and  not  a  gain.  He  expends  his 
labor  at  a  risk.  If  things  turn  in  his  favor,  he  will  gain, 
if  against  him  he  will  lose.  In  this  respect  this  case 
does  not  in  any  degree  differ  from  any  other  outlay  of 
labor.  In  this  as  in  all  other  things,  no  man  is  certain 
when  he  expends  his  labor,  that  he  shall  gain  that  which 
he  seeks  by  the  outlay. 

There  is  always  a  presumption  however,  that  he  who 
by  an  expenditure  of  labor  acquires  the  ownership  of  a 
good  piece  of  land,  will  obtain  a  possession  which,  by 
the  growing  prosperity  of  the  community,  will  on  the 
whole  increase  in  value.  It  will  hereafter  be  shown,  in 
treating  of  the  rent  of  land,  that  this  probability  is  allowed 
for  in  every  contract  for  rent.  No  man  receives  as  high 
interest  on  his  landed  capital,  as  on  capital  invested  in 
other  ways.  He  willingly  consents  to  receive  a  part  of 
his  interest  in  the  presumed  regular  enhancement  of  the 
price  of  his  land  by  the  progress  of  society.  It  is  an  ad- 
vantage which  he  does  not  get  for  nothing,  but  constantly 
pays  for  it. 

We  come  therefore  to  the  conclusion  that,  in  rela- 
tion to  our  science,  land  is  simply  and  only  a  gift  of  God 
to  man,  which  in  its  natural  condition  is  without  value, 
but  which  is  rendered  by  the  expenditure  of  human  labor 
on  it,  the  most  powerful  and  important  instrument  of 
supplying  human  want.  It  is  as  truly  and  simply  fixed 
capital,  as  a  water-wheel  or  steam  engine.  So  we  have 
classified  it  in  this  treatise,  and  so  we  shall  continue  to 
regard  it,  in  considering  the  share  of  the  gains  of  Indus 
try,  which  natural  law  will  allot  to  capital. 


•©4  ECONOMICS. 

CHAPTER  VII. 

Interest. 

§  150.  The  share  of  the  capitalist  in  the  gains  of  pro- 
duction must  next  be  considered.  These,  according  to 
the  nature  of  the  investment  from  which  they  are  derived 
are  called  either  Interest^  Rent  or  Profit.  Of  these  In- 
terest is  the  least  complicated  and  will  therefore  be  first 
considered. 

Definition,  Interest  is  compensation  for  the  use  of 
capital  which  is  entirely  entrusted  to  another^  to  be  repaid 
to  its  owner  at  a  specified  time,  and  with  such  considera- 
tion for  its  use  as  may  be  agreed  on. 

In  some  cases  compensation  for  the  use  of  capital  is  all 
which  is  included  in  interest.  The  security  for  the  re- 
payment of  the  sum  loaned  according  to  the  conditions, 
is  regarded  as  perfect,  and  therefore  no  consideration  is 
paid  for  any  risk.  Loans  to  stable  and  regular  govern- 
ments, for  example  like  those  of  England  and  the  United 
States,  are  regarded  as  being  of  this  character.  Loans 
secured  by  mortgage  of  real  estate  may  be  made  as  secure 
as  anything  human  can  be.  But  in  a  great  number  of 
loans  from  one  individual  to  another,  a  greater  or  less 
degree  oi  risk  is  encountered,  and  the  capitalist  receives 
compensation  both  for  the  use  of  his  capital  while  in  the 
control  of  the  borrower,  and  for  the  risk  which  he  en- 
counters that  it  may  not  be  repaid  to  him  according  to 
the  contract.  The  lender  will  demand  a  higher  rate  of 
interest  in  some  cases  than  in  others,  according  to  his 
estimate  of  the  risk  incurred.  This  is  the  reason  why 
some  governments  are  able  to  borrow  money  at  the  ver) 
lowest  rates,  while  others  can  scarcely  borrow  it  at  all 


INTEREST.  205 

and  if  at  all,  only  at  very  exorbitant  interest.  The  same 
is  true  of  individual  borrowers.  It  will  be  the  lot  of  the 
man  who  is  ill  able  to  pay  any  interest  at  all,  that  he 
will  pay  a  much  higher  rate  than  the  man  whose  means 
of  pavment  are  most  abundant.  It  is  not  because  the 
lender  desires  to  oppress  the  poor,  but  because  he  must 
have  insurance  for  the  risk  he  runs. 

§  151.  The  principle  07i  which  the  payment  of  interest  is 
founded  is  very  obvious.  A  man  may  possess  capital 
which  he  cannot  himself  use.  He  may  be  incapacitated 
by  the  infirmities  of  age  or  disease  so  to  manage  it  as  to 
derive  profit  from  it.  He  may  follow  an  avocation  in 
life  in  which  he  cannot  invest  his  gains  so  as  to  derive 
advantage  from  them.  If  he  can  get  nothing  for  the  use 
of  his  capital,  he  will  not  incur  the  risk  of  entrusting  it 
to  the  hands  of  another,  but  will  lay  it  away  as  safely  as 
he  can  for  future  use.  The  only  motive  therefore  which 
can  induce  him  to  part  with  it  is,  that  he  may  receive  a 
fair  compensation  for  its  use,  and  for  any  risk  which  may 
attend  the  transaction.  He  will  seek  a  borrower,  and  he 
will  find  some  one  of  good  credit,  who  will  be  willing  to 
pay  him  the  market  rate  of  interest.  For  there  are 
always  those  who  have  power  and  skill  to  labor,  but 
no  capital  with  which  to  procure  necessary  tools  and 
materials. 

The  same  competition  which  controls  all  other  values 
will  no  less  assert  its  supremacy  in  determining  the  rate 
of  interest,  and  that  rate  which  competition  has  estab- 
lished for  loans  involving  only  ordinary  risk  will  be  de- 
manded by  the  lender  and  willingly  paid  by  the  borrower. 

It  is  not  easy  to  see  what  excuse  the  legislator  can 
plead  for  interfering  in  this  matter.  And  yet  in  all  the 
past  history  of  the  world  he  has  shown  a  strange  but 
universal  propensity  to  do  so.  In  most  countries  of  the 
world  a  reason  might  have  been  given  for  it,  which  can 


2o6  ECONOMICS. 

have  no  validity  in  this  country  at  the  present  time.  In 
numerous  instances  both  ancient  and  modern,  govern- 
ments have  not  only  undertaken  to  compel  the  fulfillment 
of  contracts,  but  have  enforced  the  payment  of  debts  by 
the  imprisonment  of  the  debtor,  and  even  by  selling  him 
into  slavery.  If  governments  resort  to  such  measures 
for  the  collection  of  debts,  it  is  quite  reasonable  that  they 
should  so  construct  the  law  as  not  to  favor  the  increase 
of  indebtedness,  or  even  to  discountenance  the  lending 
of  money  on  any  terms.  Perhaps  this  is  one  of  the  rea- 
sons why  usury  laws  have  been  so  persistently  adhered 
to.  But  if  this  is  so,  a  more  humane  treatment  of  the 
debtor  should  be  accompanied  by  their  abolition.  When 
as  at  the  present  time  in  this  country,  the  law  not  only 
exempts  from  seizure  for  debt  the  person  of  the  debtor, 
but  also  a  considerable  amount  of  his  property,  in  the 
form  of  necessary  household  goods  and  tools  of  his  oc- 
cupation, that  reason  for  legislative  interference  between 
the  borrower  and  the  lender  can  no  longer  have  any 
weight. 

It  must  however  be  conceded,  that  the  propriety  and 
wisdom  of  the  usury  laws  of  other  ages,  and  perhaps  of 
other  countries  in  our  own  age,  cannot  be  safely  judged 
by  our  standards.  It  may  be  clear^  that  laws  regulating 
the  rate  of  interest  are  incongruous  with  the  general  free- 
dom of  our  system,  and  a  violation  of  economic  law  ;  but 
it  will  not  hence  follow  that  in  countries  where  all  the 
economic  forces  are  in  a  great  measure  counteracted  and 
held  in  abeyance,  such  laws  may  not  be  necessary  for 
protecting  the  debtor  against  the  cruel  exactions  of  the 
cred'tor.  No  one  familiar  with  the  Latin  classics  can 
fail  to  see,  that  under  Roman  laws  there  was  such  a 
necessity. 

The  law  of  ownership  means  that  the  owner  will  de- 
cide by  his  own  free  will  on  what  terms  he  will  part  with 


INTEREST.  207 

his  capital,  and  it  equally  means  that  the  borrower  will 
decide  on  what  terms  he  will  consent  to  take  it.  Till 
tliese  two  wills  are  brought  to  coincide  in  the  matter, 
there  may  be  force,  but  there  can  be  no  loan  ;  and  when 
they  are  at  one  by  free  competition,  it  is  impossible  to 
give  any  good  reason  why  any  other  personality  should 
interfere  in  the  case.  There  can  be  no  such  interference 
without  a  direct  violation  of  ownership.  We  say  nothing 
of  the  morality  of  such  interference,  but  we  do  say  that 
it  is  a  violation  of  that  original  law  of  ownership  which 
is  the  foundation  of  our  whole  science.  It  is  moreover 
a  futile  and  useless  interference,  an  attempt  to  control  by 
statute  law  that  which  a  law  of  nature  has  already  de- 
cided, and  placed  quite  beyond  the  sphere  of  human 
legislation.  It  is  within  the  domain  of  natural  law,  and 
therefore  statute  law  will  in  vain  attempt  to  meddle  with 
it.  The  law  may  forbid  the  capitalist  to  demand  or  ac- 
cept more  than  a  given  rate  of  interest,  but  it  cannot 
compel  him  to  lend  at  that  rate.  If  he  can  use  his  cap- 
ital more  profitably  in  other  ways  than  by  lending  it  at 
that  rate,  he  will  not  lend  it.  It  may  forbid  the  borrower 
being  compelled  to  pay  more  than  a  given  rate,  but  it 
cannot  enable  him  to  obtain  money  at  that  rate.  It  may 
forbid  two  human  wills  consenting  together  at  any  other 
point  than  that  determined  by  the  law,  but  it  cannot 
rnake  them  consent  at  that  point.  It  may  throw  obstacles 
in  the  way  of  borrowing  and  lending  capital,  and  thus  do 
great  injury  to  both  parties.  But  it  cannot  make  them 
borrow  and  lend  on  any  other  terms  than  those  they 
mutually  agree  upon.  While  men  retain  within  them- 
selves an  intuitive  perception  of  the  nature  and  inaliena- 
ble character  of  ownership,  laws  forbidding  men  to  con- 
tract to  lend  and  borrow  money  on  such  terms  as  seem 
to  them  fit,  will  be  essentially  nugatory,  and  provoke 
unceasing  efforts  at  evasion,  and  men  will  be  ingenious 


2C8  ECONOMICS. 

enough  to  render  those  evasions  successful.  While  the 
general  spirit  of  trade  is  as  at  present,  these  predictions 
will  be  everywhere  verified  by  fact.  The  law  will  more- 
over fail  to  find  any  support  in  the  conscience  of  the 
community.  There  will  be  a  feeling  in  the  hearts  of 
men,  that  the  law  violates  the  property  rights  both  of  the 
borrower  and  of  the  lender,  and  efforts  at  evasion  will 
either  not  be  regarded  as  wrong  at  all,  or  be  judged  very 
leniently,  as  sins  of  so  venial  a  character  as  not  to  merit 
any  severe  condemnation.  We  ask  all  thoughtful  men 
who  are  practically  acquainted  with  this  matter,  to  judge 
for  themselves,  whether  the  above  picture  is  not  a  true 
exhibition  of  the  facts  as  well  as  of  the  theory  of  the 
case.  If  this  is  so,  more  words  are  unnecessary.  The 
sooner  our  legislators  withhold  their  hands  from  all  inter- 
ference in  this  matter,  the  better  it  will  be  both  for  trade 
and  morals. 

§  152.  When  borrower  and  lender  are  left  free  of  any 
legislative  interference,  there  is  probably  no  case  in  the 
whole  economic  system  in  respect  to  which  competition 
acts  more  freely  than  in  determining  the  rate  of  interest. 
There  are  seldom  or  never  any  attempts  to  control  it  by 
combinations,  either  of  lenders  or  borrowers.  The  rates 
actually  paid  in  different  countries  at  the  same  time,  and 
in  the  same  country  at  different  times,  vary  between  very 
wide  extremes.  In  some  countries,  in  transactions  sup- 
posed to  involve  no  risk,  it  is  as  low  as  two  per  cent  per 
annum.  In  some  cases,  as  for  example  in  the  new  states 
of  our  own  country,  it  is  sometimes  as  high  as  fifty  or  even 
sixty  per  cent  per  annum.  It  is  perhaps  generally  sup- 
posed that  in  these  last  cases  rates  of  interest  seemingly  so 
exorbitant  can  be  occasioned  only  by  the  great  risk  which 
the  capitalist  incurs.  But  so  far  as  our  observation  has 
extended,  this  is  by  no  means  a  fact.  These  rates  are 
often  due  largely  to  the  exceedingly  low  rates  at  which 


INTEREST.  209 

the  government  offers  the  perpetual  ownership  of  some 
of  the  most  fertile  lands  in  the  world,  and  the  scarcity 
on  the  frontier  of  the  money  with  which  only  the  pur- 
chase can  be  made.  Most  men  who  emigrate  to  the 
frontier  wilds  carry  little  wilh  them  except  their  power 
to  labor.  For  the  small  sum  of  money  necessary  to  pro- 
cure for  them  the  perpetual  ownership  of  a  farm  of  a 
sufficient  size,  and  indispensable  tools,  implements  and 
domestic  animals,  they  can  afford  to  pay  almost  any  rate 
of  interest  that  may  be  demanded.  In  many  cases  they 
hope,  not  without  reason,  to  repay  the  loan  out  of  the 
first  two  or  three  crops  from  the  land.  They  are  there- 
fore willing  to  give  to  the  money-lender  a  liberal  share 
of  the  very  large  profits  they  are  likely  to  receive,  rather 
than  not  obtain  the  small  sum  of  money  which  is  quite 
indispensable  to  their  success.  Indeed  one  has  only  to 
study  the  conditions  under  which  the  borrowing  and 
lending  of  money  is  transacted  in  a  prosperous  frontier 
settlement,  to  become  ^jite  convinced  of  the  inexpedi- 
ency and  inherent  absurdity  of  laws  regulating  the  rate 
of  interest.  If  in  such  circumstances  usury  laws  could 
succeed  in  limiting  the  lending  of  money  to  a  prescribed 
medium  rate  of  interest,  that  success  would  be  the  great- 
est possible  injury  both  to  borrower  and  lender.  The 
borrower  would  be  unable  to  obtain  money  when  it  would 
be  a  very  great  benefit  to  him  to  get  it,  even  at  a  much 
higher  rate  of  interest  than  that  demanded,  and  the 
lender,  unable  to  obtain  his  share  of  the  gains  of  the 
transaction  by  lending  his  money,  would  himself  pur- 
chase the  land  of  the  government,  and  sell  it  out  to  the 
actual  settler  on  terms  much  less  favorable  to  him,  than 
to  have  lent  him  the  money  at  the  high  rate  of  interest 
proposed. 

§  153.  It  can  hardly  be  interesting  or  profitable  to 
trace  out  the  nearly  innumerable  causes  which  product 


2IO  ECONOMICS. 

variations  of  the  rate  of  interest  between  these  widely  re- 
mote extremes.  Through  all  the  fluctuations  which  they 
occasion,  they  are  as  true  to  the  one  law  of  competition, 
as  the  tides  of  the  ocean  are  to  the  law  of  gi-avitation. 
Sometimes  doubtless  risk  is  the  chief  element  of  varia- 
tion, as  is  apparent  in  the  rates  of  the  government  loans 
of  England  and  Holland  on  the  one  hand,  and  those  of 
Turkey  and  Egypt  on  the  other.  Sometimes  high  rates 
of  interest  are  occasioned,  as  in  Australia  and  in  our 
own  new  states,  by  the  large  profits  that  can  be  realized 
from  the  possession  of  capital,  and  the  great  scarcity  of 
money  in  a  community  of  recent  emigrants.  Men  who 
have  plenty  of  money  have  no  motive  to  emigrate  to  the 
wilderness,  and  are  not  easily  persuaded  to  send  their 
capital  where  they  are  not  willing  to  go  in  person. 

Any  occurrence  which  raises  men^s  hopes  of  gain  to  be 
realized  from  the  investment  of  capital  in  active  trade,  will 
make  them  more  anxious  to  obtain  it,  and  willing  to  offer 
a  higher  rate  of  interest  for  it.  Any  thing  which  dimin- 
ishes the  profits  of  trade  and  depresses  men's  hopes  will 
render  them  less  desirous  of  borrowing  money,  less  dis- 
posed to  compete  with  each  other  for  the  possession  of  it, 
and  therefore  reduce  the  rate  of  interest.  The  phrase 
"  value  of  money  "  has  two  very  different  meanings.  In 
one  use  of  it,  it  means  the  value  of  the  precious  metals 
as  compared  with  the  value  of  other  commodities.  In 
this  sense  it  has  been  shown  that  the  value  of  money  is 
less  liable  to  fluctuation  than  any  other  commodity,  and 
that  therefore  it  is  better  fitted  than  any  thing  else  to  be 
the  medium  of  exchange,  and  the  standard  of  all  value. 
In  the  other  use  of  it  the  meaning  of  the  phrase  is  the 
rate  of  interest  which  money  will  command  in  the  mar- 
ket. In  this  use  of  the  term  few  things  are  more  fluctuat- 
ing in  value  than  money,  and  therefore  few  things  are  more 
suitable  to  be  left  to  the  influence  of  free  competition. 


INTEREST.  211 

The  tenure  of  land  in  fee  simple^  and  the  existence  of 
perfect  freedom  of  exchange  in  respect  to  it,  have  a  most 
salutary  influence  on  the  interest  market.  They  tend 
greatly  to  secure  it  against  violent  fluctuations,  and 
dangerous  extremes,  and  enable  all  that  very  large  por- 
tion of  the  community  that  under  such  a  system  own 
land,  at  all  times  to  borrow  money  at  the  lowest  current 
rate,  without  paying  for  extraordinary  risk.  For  this  rea- 
son all  those  provisions  of  the  law  which,  under  the  in- 
tention of  protecting  the  debtor,  make  the  foreclosure  of 
mortgages  difficult,  expensive,  or  subject  to  long  delays, 
are  on  the  whole  injurious  to  borrowers,  rather  than 
beneficial.  The  more  direct  and  speedy  the  remedy  of  the 
creditor  is,  in  case  of  the  failure  of  the  debtor  to  pay  ac- 
cording to  contract,  the  lower  the  rate  of  interest  at  which 
he  will  be  wiUing  to  lend  money.  It  is  probable  that 
this  is  one  of  the  causes  why  the  rate  of  interest  is  so  high 
in  British  India.  It  is  not  merely  on  account  of  the 
scarcity  of  capital,  but  also  partly  because,  owing  to  the 
absence  of  the  tenure  of  land  in  fee  simple,  few  are  able 
to  give  any  satisfactory  security  for  money  borrowed. 
This  is  a  curious  illustration  of  the  tendency  of  the  ten- 
ure of  land  to  exert  an  influence  on  all  the  economies  of 
a  community.  Free  trade  in  land  tends  to  freedom  in 
every  thing  else. 

§  154.  It  may  seem  to  some  that  the  fact  that  the  rate 
of  interest  may  differ  very  considerably  in  two  neighbor- 
ing countries  at  the  same  time,  as  is  the  fact  in  respect 
to  England  and  Holland,  is  inconsistent  with  what  we 
have  said  of  the  cosmopolitan  character  of  capital.  Why, 
it  may  be  asked,  should  a  Hollander  lend  his  money  at 
home  at  two  per  cent,  when  he  can  obtain  for  it  in  the 
English  funds  three  and  a  quarter  per  cent?  The  answer  is, 
that  this  is  not  by  any  means  a  national  affair.  The  same 
thing  is  just  as  likely  to  occur  in  respect  to  different  parts 


2  12  ECONOMICS. 

of  the  same  country,  as  between  different  nationalities. 
There  have  been  times  when  the  current  rate  of  interest 
in  IHinois  was  fifty  per  cent,  while  in  Massachusetts  it 
was  six  per  cent.  And  yet  the  lender  in  Illinois  certainly 
incurred  no  extraordinary  risk.  The  explanation'of  the 
phenomenon  is  found,  not  in  any  relation  of  capital  to 
nationality,  but  in  the  fact  that  a  capitalist  always  pre- 
fers to  have  his  capital  near  him,  under  his  own  eye,  and 
under  social  conditions  with  which  he  is  familiar.  Es- 
pecially he  prefers  to  invest  it  under  laws  which  he  un- 
derstands, and  with  the  administration  of  which  he  is  well 
acquainted.  In  such  circumstances  he  would  rather 
accept  less  interest,  than  make  an  investment  in  circum- 
stances which  he  regards  as  less  desirable.  It  is  an  ad' 
ditional  consideration  applying  to  foreign  investments, 
that  in  case  of  a  war  between  his  own  country  and  that  in 
which  the  investment  is  made,  payment  would  be  sus- 
pended during  the  war.  This  of  course  would  be  re- 
garded as  a  very  great  objection  to  a  foreign  investment, 
unless  the.  peace  of  the  two  countries  was  regarded  as  in 
a  great  degree  assured.  Undoubtedly  the  danger  of  the 
occurrence  of  war  between  the  different  nations  of  the 
earth  is  a  very  great  obstacle  to  the  free  circulation  of 
capital.  The  nations  of  the  world  can  never  enjoy  the 
full  benefit  of  the  universal  human  relations  of  capital, 
except  on  condition  of  maintaining  universal  peace. 

§  155,  The  rate  of  interest  always  declines  with  the 
gradual  progress  of  a  community  in  wealth  and  general  civ- 
ilization. This  is  abundantly  established  by  reference  to 
the  past  history  of  civilization.  The  fact  is  doubtless 
partly  owing  to  diminished  risk.  With  the  healthy  pro- 
gress of  society  trade  becomes  more  regular,  systematic 
and  sure  in  its  results,  governments  become  more  stable 
and  just,  and  are  more  skillfully  administered  for  the 
protection  of  all  the  rights  of  property.     But  this  is  cer- 


INTEREST.  213 

tainly  not  a  complete  account  of  the  matter.  It  seems 
to  be  a  great  law  of  human  progress,  that  of  all  the  ele- 
ments that  enter  into  the  economic  system  of  the  world, 
capital  is  that  which  increases  most  rapidly.  If  a  savage 
enters  on  the  attempt  to  become  a  civilized  man,  with 
nothing  but  his  bow  and  arrows  to  begin  with,  he  must 
first  accumulate  a  surplus  over  self-support,  to  buy  a 
rifle.  With  that  greatly  improved  instrument,  he  will  be 
able  to  accumulate  much  more  rapidly  than  before.  In 
a  short  time  he  will  not  only  be  the  owner  of  a  rifle,  but 
he  will  have  besides  an  accumulated  surplus  by  which  he 
will  be  able  to  procure  the  means  of  rendering  his  labor 
still  more  efficient,  and  his  accumulation  still  more  rapid. 
The  same  principle  seems  to  hold  for  every  successive 
step  of  his  progress.  Each  new  invention,  each  new 
natural  force  that  is  made  the  helper  of  his  labor,  not 
only  compensates  for  the  outlay  of  capital  it  has  cost,  but 
greatly  multiplies  his  surplus  for  still  further  and  more 
important  investments.  In  this  whole  matter,  the  Scrip- 
ture is  constantly  fulfilled  :  "  To  every  one  that  hath  shall 
be  given."  With  each  new  triumph  of  man  over  the 
powers  of  nature,  other  and  greater  triumphs  become 
possible,  which  before  were  quite  impossible,  and  we  can 
set  no  limits  to  the  possibilities  of  the  future  except  the 
limits  within  which  gravitation  and  inertia  confine  us. 

But  capital  obeys  the  same  law  of  supply  and  demana 
which  prevails  everywhere  in  the  economic  world.  If  one 
element  increases  more  rapidly  than  any  other,  it  will 
inevitably  decline  in  price.  This  one  consideration  fully 
explains  the  certain  and  steady  decline  of  the  rate  of 
interest  in  all  countries  of  growing  wealth  and  civiliza- 
tion. It  is  the  prodigality  of  nature's  provision  for  all 
man's  prospective  wants,  and  for  his  highest  possible 
development. 

§  L56.  Some  of  the  most  important  consequences  of 


214  •  ECONOMICS. 

this  law  we  are  not  prepared  to  examine  at  the  present 
stage  of  our  inquiries.  There  is  however  one  important 
relation  of  the  law,  which  it  is  proper  to  point  out  in 
this  place.  This  sure  decline  of  the  rate  of  interest  sug- 
gests the  thought,  that  it  must  at  length  reach  a  point  be- 
yond which  the  gain  to  be  derived  from  capital  would 
become  so  small,  that  there  would  be  no  sufficient  in- 
ducement for  any  further  etfbrt  at  accumulation,  and  that 
consequently  capital  would  cease  to  increase^  and  the  rate 
of  interest  would  become  stationary.  We  are  not  disposed 
to  deny  that  at  some  distant  future  point  of  human  pro- 
gress, there  may  occur  a  maturity  of  civilization  over  this 
whole  earth,  such  as  would  produce  a  stationary  condi- 
tion both  of  capital  and  interest.  But  a  little  considera- 
tion will  convince  us,  that  that  point  is  yet  so  remote  in 
the  distant  future,  that  the  prospect  of  its  being  reached 
should  awaken  neither  hope  nor  fear.  There  may  be 
for  aught  we  know  a  limit  to  the  solar  system,  beyond 
which  inevitable  disaster  awaits  it.  But  the  danger  is 
too  deep  in  the  dark  unknown  future,  to  awaken  any 
present  apprehension.  The  danger  of  any  such  disaster 
in  the  economic  world  can  hardly  be  more  imminent. 

In  considering  this  matter  that  cosmopolitan  nature  of 
capital  which  we  have  already  demonstrated,  should  not 
be  forgotten.  In  order  that  this  minimum  possible  rate 
of  interest  should  be  reached,  the  demand  of  the  whole 
world  for  capital  must  be  far  more  perfectly  supplied 
than  it  is  at  present  supplied  in  such  countries  as  England 
and  Holland,  where  the  rate  of  interest  is  lowest.  At  an 
interest  of  three  and  a  quarter  per  cent  in  one  of  these 
countries,  and  two  per  cent  in  the  other,  in  transactions 
involving  no  risk,  the  accumulation  of  capital  is  still 
prosecuted  with  great  zeal  and  energy.  How  much 
lower  point  it  may  reach  without  causing  a  cessation  of 
accumulation  we  have  no  experiment  by  which  it  can  be 


INTEREST.  215 

determined.  But  the  experiments  with  which  we  are 
here  furnished  are  quite  sufficient  to  prove,  that  the  in- 
crease of  capital  cannot  be  arrested  till  the  demands  of 
the  whole  human  family  are  far  better  supplied  than  the 
demands  of  either  of  those  countries  are  at  the  present 
time.  On  the  supposition  of  a  long  future  of  peace  over 
the  whole  earth,  and  of  such  reforms  in  the  governments 
of  the  world  as  will  render  property  as  secure  everywhere, 
as  it  now  is  in  those  two  favored  countries,  this  world- 
wide demand  for  capital  could  not  be  so  completely  sup- 
plied except  in  some  exceedingly  distant  future  age. 

§  157.  There  is  another  consideration  which  tends  to 
postpone  the  day  at  which  such  a  stationary  condition 
of  the  economic  forces  of  the  world  can  occur  to  a  still 
more  distant  future.  As  the  interest  on  capital  is  di- 
minished, the  demand  for  it  must  be  increased  in  a  very 
rapid  ratio.  The  case  is  closely  analogous  to  the  in- 
creased demand  for  labor  which,  we  have  shown,  results 
from  the  use  of  labor-saving  machinery.  The  first  effect 
is  that  labor  is  dispensed  with,  and  the  demand  for  labor 
diminished.  But  the  immediately  succeeding  effect  is, 
that  millions  are  to  be  supplied  with  the  cheapened 
product,  where  before  only  thousands  could  enjoy  it,  and 
this  increased  demand  far  more  than  compensates  for  the 
diminished  amount  of  labor  requisite  to  produce  a  given 
quantity.  The  aggregate  result  is,  as  we  have  seen,  an 
almost  unlimited  increase  of  the  demand  for  labor. 

So  is  it  in  the  case  under  consideration.  A  vast 
increase  of  capital  would  be  necessary  to  supply  all 
which  would  be  demanded,  for  example  in  the  United 
States,  at  the  present  rate  of  interest.  But  if  the  rate 
of  interest  should  decline,  as  it  surely  will,  by  the  regular 
process  of  increasing  wealth  and  prosperity,  to  two  or 
three  per  cent,  who  can  compute  the  vastness  of  the  de- 
mand for  the  use  of  it  which  would  come  with  those  low 


ai6  ECONOMICS. 

rates  of  interest  ?  How  many  and  how  vast  would  the 
enterprises  be,  which  would  then  become  practicable  and 
easy,  which  at  the  present  rates  of  interest  are  not  to  be 
even  for  a  moment  thought  of?  Who  can  compute  the 
amount  of  capital  which  would  be  absorbed  in  enterprises 
which  in  the  present  state  of  things  would  be  quite  chi- 
merical, and  yet  in  the  state  of  things  supposed  would  be 
easily  rendered  actual  ?  The  same  would  be  true  over 
the  whole  world.  In  such  a  state  of  things  enterprises 
would  everywhere  be  undertaken  and  carried  through, 
which  in  our  times  are  never  thought  of.  It  would  ex- 
pose one  to  ridicule  barely  to  suggest  many  an  under- 
taking, which  in  such  circumstances  would  be  far  more 
easily  accomplished  than  the  Suez  Canal  or  a  continuous 
line  of  railway  across  the  continent  of  North  America  in 
our  own  times. 

At  those  low  rates  of  interest  the  possible  uses  of 
capital  would  become  so  numerous  and  the  amount 
necessary  to  satisfy  them  so  great,  that  a  very  great  in- 
crease of  the  capital  of  the  whole  world  would  hardly  have 
an  appreciable  influence  on  the  general  rate  of  interest. 
Ever  so  great  an  increase  of  capital  in  one  country 
would  be  like  a  flood  in  a  single  river,  causing  it  perhaps 
to  overflow  all  its  banks,  but  having  no  sensible  influence 
on  the  level  of  the  ocean.  The  capital  of  the  world  is 
oceanic,  as  truly  as  its  medium  of  exchange.  When  the 
rate  of  interest  for  the  whole  world  shall  have  been 
brought  down  by  general  prosperity  to  two  per  cent,  the 
additional  increase  of  capital  necessary  to  reduce  it  to 
one  and  a  half  would  run  far  up  toward  the  infinite. 
Those  who  are  alarmed  at  the  prospect  of  a  coming 
stationary  period  are  certainly  troubled  with  groundless 
apprehensions. 

§  158.  It  may  be  suggested  in  reply  to  the  conclu 
sions  of  the  previous  section,  that  they  are  founded  on 


INTEREST.  2  1  ^ 

suppositions  not  likely  to  be  realized,  that  the  world  is  not 
likely  to  have  a  long  future  of  universal  peace,  that  the 
governments  of  the  world  are  not  likely  to  be  so  reformed 
as  to  make  rights  of  property  as  secure  everywhere,  as 
they  now  are  in  the  most  civilized  countries.  Then 
surely  we  may  dismiss  all  our  apprehensions  about  the 
occurrence  of  a  stationary  condition  of  economic  forces. 
Without  the  fulfillment  of  those  conditions,  it  never  can 
come.  Meanwhile  it  is  certain  the  condition  of  the 
world  is  becoming  from  generation  to  generation  more 
favorable  to  great  economic  enterprises,  and  inviting 
openings  are  presenting  themselves  for  the  investment 
of  capital  in  many  and  remote  lands.  If  some  countries 
are  becoming  gorged  with  capital,  and  do  not  present 
at  any  particular  time  satisfactory  modes  of  investment, 
the  world  is  before  the  capitalist,  and  the  capital  which 
will  not  yield  him  interest  in  his  own  country  will  not  fail 
to  find  a  remunerating  demand  elsewhere. 

Nor  is  there  any  reason  to  suppose  that  the  resources 
of  labor-saving  invention  are  yet  exhausted.  When  we 
consider  the  demands  for  more  capital  which  have  been 
created  by  the  inventions  of  the  last  century,  we  have 
surely  little  cause  to  apprehend  any  lack  of  demand  in 
coming  ages.  Who  is  able  to  compute  the  time  requisite 
to  accumulate  a  sufficient  amount  of  capital  to  give  to 
the  whole  world  the  full  benefit  of  the  inventions  of  the 
last  century  ?  When  will  the  world  be  rich  enough  to 
procure  for  itself  the  advantages  of  the  railway  system 
for  all  its  peoples,  as  they  are  now  enjoyed  by  a  few  of 
the  more  civilized  nations  of  the  world  ?  There  can  be 
no  reason  to  fear  that  the  emigration  of  capital  from 
countries  where  it  is  superabundant,  and  the  use  of  it  in 
multiplying  labor-saving  machinery  to  supply  the  wants 
of  the  world,  will  not  so  sustain  the  rate  of  interest  for  a 
long  time  to  come,  that  there  need  be  no  apprehension 

lO 


2l8  ECONOMICS. 

that  it  will  touch  a  lower  point  than  it  has  already  reached 
in  a  few  favored  countries. 


CHAPTER   VIII. 
Rent. 


§  159.  The  word  rent  is  used  with  a  good  deal  of 
latitude  of  signification.  It  is  not  only  applied  to  land 
and  all  permanent  improvements  of  it,  but  to  many  other 
of  the  more  permanent  forms  of  fixed  capital.  The 
peculiarities  however  which  make  it  necessary  to  give  it 
a  separate  consideration  in  this  treatise  pertain  only  to 
lapd  and  the  various  permanent  structures  reared  upon 
it — to  land  in  actual  use  for  the  various  purposes  for 
which  it  is  employed  in  the  processes  of  production  and 
exchange.  In  our  definition  we  shall  confine  the  word 
within  these  limits,  taking  no  account  of  various  other 
forms  of  property  to  which  it  may  be  loosely  applied. 

Definition.  Rent  is  the  compensation  received  for  the 
use  of  capital  invested  in  land. 

As  no  human  possession  can  be  more  secure  from 
liability  to  loss  than  capital  invested  in  land  at  its  mar- 
ket value,  the  compensation  received  for  it  will  be  for 
use  only^  without  any  consideration  of  risk.  It  cannot 
therefore  be  higher  than  interest  at  the  lowest  rate,  on 
the  present  value  of  the  land.  The  nature  of  the  case 
would  lead  us  to  expect  that  it  would  be  even  lower  than 
the  rate  of  interest,  in  cases  in  which  the  security  is  sup- 
posed to  be  absolute.  A  presumption  always  exists, 
that  the  value  of  the  land  will  be  steadily  enhanced  with 
the  progress  of  society.  For  this  reason  a  landholder  will 
always  be  willing  to  receive  a  lower  rate  of  interest  for 


RENT.  219 

his  capital  invested  in  land,  because  that  capital  itself  is 
presumed  to  be  increasing  in  value.  In  addition  to  this 
in  some  countries,  as  for  example  in  England,  the  land 
owner  enjoys  considerable  advantages  of  respectability, 
dignity  and  social  position,  for  himself  and  his  family, 
which  all  men  value,  and  for  the  sake  of  enjoying  which, 
he  is  willing  to  invest  his  capital  at  a  lower  rate  of  inter- 
est than  he  would  expect  from  other  investments. 

It  is  also  true  that  the  national  passion  for  owning 
land  which  so  permeates  all  English  thought,  custom  and 
literature,  is  not  entirely  extinct  even  yet  in  any  of  the 
peoples  that  are  off-shoots  of  England,  that  still  use  the 
English  language,  and  read  English  books.  Perhaps 
even  more  than  this  is  true.  Perhaps  a  desire  to  own 
land  has  its  seat  in  human  nature  itself.  Perhaps  it  is 
natural  for  man  as  man,  to  feel  a  peculiar  sense  of  dig- 
nity, independence  and  personal  importance,  when  tread- 
ing on  his  own  soil,  and  sitting  beneath  his  own  roof. 
We  suspect  that  men  universally  have  a  pleasure  in  the 
ownership  of  land,  which  renders  them  willing  to  invest 
capital  in  land  with  the  expectation  of  receiving  from  it 
less  value  in  return,  than  they  would  demand  from  most 
other  modes  of  investment. 

§  160.  One  question  relating  to  rent  has  received  a 
great  deal  of  attention  from  economists,  and  occasioned 
much  diversity  of  opinion.  That  question  respects  the 
cause  of  the  increase  of  the  rent  of  land  which  always  at- 
tends an  iftcrease  of  population  and  wealth,  unless  that 
increase  is  accompanied  by  the  introduction  of  agricul- 
tural products  from  more  remote  sources  of  supply.  The 
theory  of  the  subject  now  generally  received  by  the  lead 
ing  representatives  of  English  economic  thought  is  that 
published  in  18 17  by  David  Ricardo^  in  his  Principles  of 
Political  Economy  and  Taxation,  It  has  been  generally 
regarded  since  that  time  by  writers  of  the  English  school, 


220  ECONOMICS. 

as  a  complete  solution  of  the  question.  It  may  be 
succinctly  stated  thus :  The  rent  of  any  piece  of  land  at 
any  time  will  be  precisely  equal  to  the  difference  between  the 
net  value  of  its  products  and  the  net  value  of  the  product 
of  the  poorest  land,  whose  products  barely  pay  the  expense 
of  cultivation,  without  any  rent.  The  reasoning  by  which 
it  is  sustained  is  something  like  the  following.  In  the 
first  settlement  of  a  country,  there  can  be  no  rent,  for 
there  will  be  more  land  of  the  best  quality  than  can  be 
cultivated,  and  therefore  any  one  can  have  as  much  land 
as  he  pleases  without  rent.  When  all  the  land  of  best 
quality  has  been  brought  into  cultivation,  and  by  reason 
of  the  increased  population  proves  inadequate  to  furnish 
the  necessary  supply  of  agricultural  products,  then  poorer 
lands  will  be  brought  into  use.  At  the  same  time  lands 
of  the  best  quality  will  begin  to  pay  rent,  because  one 
would  be  willing  to  pay  for  the  choice  between  land  of 
the  first  and  second  quality  the  difference  of  the  produc- 
tiveness of  the  two.  When  the  supply  of  the  second 
class  is  exhausted,  land  of  third  class  fertility  will  be 
entered  on,  the  second  class  will  bear  rent,  and  the  first 
class  still  higher  rent,  and  so  on,  the  first  class  rising 
higher  and  higher  as  the  increasing  demand  for  agricul- 
tural products  forces  cultivation  downward  to  poorer 
and  still  poorer  lands.  The  answer  which  this  theory 
gives  to  the  question  under  consideration  is,  that  the 
cause  of  the  increase  of  price  of  agricultural  products  is 
the  necessity  of  deriving  them  from  poorer  lands,  and 
therefore  at  an  increased  cost  of  production. 

§  i6i.  With  th2Lt  frst  settlement  of  a  country,  in  which 
Ricardo's  theory  assumes  that  a  certain  state  of  facts 
must  have  existed,  we  were  ourselves  familiarly  ac- 
quainted for  many  years,  and  are  all  able  to  bear  witness 
of  our  own  personal  knowledge.  The  case  furnishes  a 
striking  illustration  how  ill  men  succeed  in  determining 


RENT.  221 

on  theoretic  grounds,  what  facts  must  have  been  in  a 
given  case,  while  they  are  quite  ignorant  as  to  what  they 
really  were.  What  actually  occurs  in  such  circumstances 
contradicts  what  the  theory  assumes  at  every  point.  The 
notion  of  a  state  of  things  in  which  cultivated  lands  will 
bear  no  rent,  is  as  fabulous  as  the  centaur  or  the  mer- 
maid. Of  two  tracts  of  land  adjoining  each  other,  one 
would  be  under  cultivation,  the  other  not.  Both  would 
be  of  equal  and  unsurpassed  fertility.  The  tract  under 
cultivation  would  pay  a  rent  of  one  third  of  the  crop. 
The  zero  point  from  which  rent  is  to  be  reckoned  has  no 
existence  in  fact.  The  reason  is  obvious  ;  any  piece  of 
land  that  bears  cultivation  will  pay  a  rent  equal  to  the 
interest  on  the  capital  invested  in  it,  making  allowanca 
of  course  for  those  considerations  which  reduce  the  rate 
of  interest  on  capital  invested  in  lands  below  the  general 
average.  These  new  lands  under  cultivation  will  pay  a 
rent  equal  to  the  capital  invested  in  them  at  this  rate  of 
interest.  The  Creator  does  not  give  us  land  in  a  state 
of  readiness  for  the  plowman  and  the  seed-sower.  It 
must  be  subdued,  rank  and  useless  natural  growths  must 
be  removed  at  the  expense  of  no  small  amount  of  labor, 
the  whole  must  be  surrounded  by  an  enclosure,  and  fur- 
nished with  strictly  necessary  buildings.  The  prairie 
lands  of  the  upper  Mississippi  valley  probably  presented, 
in  their  natural  state,  as  few  obstacles  to  cultivation  as 
any  which  have  been  subdued  by  man.  Yet  even  they 
could  not  be  fitted  for  cultivation  for  a  less  sum  than 
six  dollars  to  ten  dollars  per  acre,  including  of  course 
the  payment  made  to  the  government  for  the  land  itself. 
This  investment  must  be  made  in  many  instances,  when 
the  interest  of  money  is  as  high  as  fifty  or  even  sixty 
per  cent  per  annum.  Men  who  are  without  capital 
would  be  glad  of  the  opportunity  of  paying  one  third  of 
the  crop  for  the  use  of  the  land  in  a  state  of  readiness 


222  ECONOMICS. 

for  seed-sowing,  through   equally  good  lands  adjoining 
them  were  unused. 

§  162.  Neither  is  the  theory  more  successful  in  indi- 
cating the  successive  steps  by  which  lands  of  different  degrees 
of  fertility  are  brought  into  cultivation.  A  great  many 
ether  considerations  besides  natural  fertility  influence 
the  choice  of  first  settlers.  The  land  is  nearly  all  cov- 
ered with  a  deposit  of  rich  mould,  resulting  from  the 
vegetable  decay  of  ages,  and  will  produce  a  few  luxuriant 
harvests  before  its  permanent  quality  becomes  apparent. 
A  forest  of  timber  or  a  spring  or  a  stream  of  water  will 
often  have  far  more  influence  on  the  choice,  than  the 
permanent  qualities  of  the  land.  Mr.  Henry  C.  Carey 
rejects  Ricardo's  theory  of  rent,  but  in  his  statement  of 
facts,  he  is  hardly  more  fortunate  than  Mr.  Ricardo's 
theoretic  assumptions.  He  represents  that  cultivation 
almost  invariably  begins  on  the  comparatively  barren 
hill  sides,  and  makes  its  way  slowly  and  gradually  down 
to  the  rich  alluvion  of  the  valleys,  where  the  most  fertile 
lands  are  found.  He  can  hardly  have  been  an  accurate 
observer  of  farming  in  new  settlements,  or  he  would  not 
have  made  such  statements.  The  circumstance  which 
affects  the  choice  of  the  new  settler  more  than  any  other 
seems  to  be,  the  cost  of  preparing  the  land  for  cultiva- 
tion. It  may  happen  that  the  very  best  land  may  also 
be  that  which  requires  a  very  small  outlay  to  subdue  it. 
Or  it  may  happen  that  the  choice  falls  on  a  well-drained 
hillside,  which  can  be  very  easily  subdued,  and  will  bear 
a  few  good  crops,  but  will  not  be  permanently  fertile. 
It  frequently  happens  also  that  some  of  the  richest  lands 
are  encumbered  with  such  natural  obstacles  to  cultiva- 
tion, that  the  rent  they  will  yield  will  not  pay  the  cost  of 
subduing  them,  till  the  community  is  already  far  advanced 
in  wealth  and  population.  Some  of  the  best  lands  on 
earth   are   lying  quite    uncultivated,  awaiting  the    time 


RENT.  223 

when  rents  shall  have  advanced  to  such  a  point  as  to 
justify  the  outlay  of  capital  necessary  to  subdue  them. 
All  the  facts  of  the  case  entirely  justify  and  sustain  our 
reasonings  and  conclusions  respecting  the  ownership  of 
land.  It  is  to  be  regarded  as  fixed  capital,  and  rent  is 
compensation  for  its  use. 

§  163.  Ricardo*s  theory  of  re7it  radically  fails  by  sub- 
stituting cause  for  effect  and  effect  for  cause.  The  real 
cause  for  the  increasing  price  of  agricultural  products, 
as  wealth  and  population  increase,  is  the  constantly 
growing  demand  for  them.  Their  price  would  rise  and 
equally  rise,  if  there  were  no  poorer  lands  that  could  be 
cultivated,  or  if  the  supply  of  them  must  be  perpetually 
derived  from  the  same  unchanging  sources.  Increasing 
demand  always  occasions  increased  price.  If  the  amount 
of  capital  needing  to  employ  laborers  is  large,  and  the 
number  of  laborers  that  can  be  employed  is  small,  cap- 
italists will  bid  against  each  other  under  the  apprehen- 
sion of  failing  to  get  the  laborers  they  need,  and  raise 
the  price  of  labor.  So  as  the  number  of  mouths  to  be 
fed  is  multiplied  while  the  supply  of  food  remains  sta- 
tionary, men  will  be  apprehensive  of  failing  to  obtain  a 
supply,  bid  against  each  other  and  raise  the  price  with- 
out any  consideration  whatever  of  the  sources  from  which 
the  supply  comes.  The  sources  of  supply  and  the  cost 
of  production  may  remain  absolutely  unchanged,  yet  if 
the  demand  is  increasing,  while  the  supply  is  stationary, 
men  will  become  apprehensive,  and  their  apprehensions 
will  have  an  effect  on  the  price.  This  is  the  one  cause 
of  the  rise  of  rents  with  increasing  wealth  and  popula- 
tion. //  is  exactly  analogous  to  the  rise  of  the  rent  of  land 
to  be  used  for  purposes  of  trade  in  the  heart  of  a  great  city. 
With  the  growth  of  the  population  and  trade  of  the  city, 
the  demand  for  those  lands  for  certain  uses  which  can- 
not be  supplied  by  any  other  lands,  constantly  increases, 


224  ECONOMICS. 

and  the  price  rises  accordingly,  and  this  increase  of 
price  will  be  limited  only  by  the  number  and  wealth  of 
those  that  want  it. 

§  164.  On  precisely  the  same  principle  the  rent  of  land 
used  for  agricultural  purposes  is  raised^  by  the  increase  of 
wealth  and  population.  The  increased  rate  of  rent  does 
not  depend  on  population  alone  but,  as  in  the  case  of 
land  used  for  purposes  of  trade,  on  wealth  also.  If  the 
people  were  all  too  poor  to  pay  any  more  for  agricultural 
products  than  they  had  been  paying,  they  could  bear  no 
increased  price,  it  would  produce  starvation.  If  the 
amount  of  capital  in  any  country  is  small  in  proportion 
to  its  population,  rent  will  be  low  however  densely  it  may 
be  peopled.  But  if  population  and  wealth  increase,  an 
advance  in  the  rent  is  inevitable.  Increased  demand 
for  agricultural  products  will  compel  increased  rent. 
Poorer  lands,  if  any  exist  not  hitherto  cultivated,  will  be 
likely  to  be  brought  into  cultivation.  Entering  on  those 
poorer  lands  will  however  be  the  effect  of  the  increased 
price  of  agricultural  products,  and  not  the  cause  of  it. 
Lands  will  be  brought  into  cultivation  perhaps,  which 
had  lain  neglected  for  ages,  because  agricultural  products 
are  so  dear  and  rents  so  high,  that  these  lands  will  now 
make  a  good  return  for  the  capital  expended  in  reducing 
them  to  cultivation.  Rent  is  not  high  because  these 
lands  are  cultivated  to  produce  food,  as  Ricardo's  theory 
would  have  it,  but  these  lands  are  under  cultivation  be- 
cause the  demand  for  agricultural  products  is  so  great 
that  they  will  yield  a  rent  which  will  satisfactorily  re- 
munerate the  capitalist  for  subduing  them.  Rents  would 
have  been  even  higher  than  they  are,  if  there  had  been 
no  poorer  lands  to  be  brought  into  cultivation,  and  no 
long  neglected  lands  which  could  be  rendered  fit  for  til- 
lage by  large  outlays  of  capital. 

§  165.  Many  writers  have  made  much  of  ^''  the  law  of 


RENT.  225 

diminishmg  returns  "  in  connection  with  rent.  We  have 
hitherto  said  nothing  on  that  subject,  because  we  think 
the  principle  so  obvious  as  hardly  to  require  statement, 
much  less  argument.  It  seems  to  us  that  any  farmer  of 
ordinary  intelligence  knows,  that,  up  to  a  certain  point, 
the  more  he  lays  out  in  the  judicious  improvement  and 
cultivation  of  a  piece  of  land;  the  larger  returns  he  will 
get,  in  proportion  to  the  outlay;  but  that  beyond  that 
point,  though  the  product  will  perhaps  still  be  increased 
by  additional  outlay,  it  will  not  be  increased  in  propor- 
tion to  the  cost.  The  more  he  expends,  the  less  his 
percentage  of  profit  will  be.  This  is  the  law  of  diminish- 
ing returns.  It  is  also  true,  that  as  rent  rises,  it  becomes 
profitable  to  expend  more  in  the  cultivation.  This  is 
because  the  increased  demand  for  agricultural  produce 
enhances  the  price,  and  thereby  compensates  for  the  di- 
minished quantity  that  is  procured  by  a  given  outlay.  In 
a  given  state  of  the  market,  five  laborers  will  obtain  from 
a  given  farm  produce  to  the  value  of  one  thousand  dol- 
lars. In  the  same  state  of  the  market,  the  produce  of 
ten  laborers  would  only  be  worth  fifteen  hundred  dol- 
lars. But  if  by  increased  demand  agricultural  products 
have  risen  in  price,  so  that  what  before  sold  for  fifteen 
hundred  dollars,  would  now  command  two  thousand 
dollars,  it  will  be  as  profitable  to  employ  the  labor  of 
ten  men,  as  it  was  before  to  employ  but  five.  That  is, 
the  advanced  price  of  agricultural  products  makes  it 
profitable  to  employ  a  greater  number  of  laborers  for  a 
given  amount  of  product.  The  same  holds  of  rent 
According  to  Ricardo's  theory  agricultural  products  are 
dearer  and  rent  higher  because  it  costs  more  to  produce 
a  given  amount.  No,  say  we,  they  are  dearer  only,  be- 
cause there  is  a  larger  demand  for  them,  and  because 
they  are  dearer,  it  is  profitable  to  produce  them  at  a 
greater  outlay  of  both  rent  and  labor.  They  are  not 
10* 


226  ECONOMICS. 

dearer  because  an  additional  supply  is  produced  at 
greater  cost,  for  they  would  be  much  dearer  than  they 
are,  if  no  additional  supply  could  be  produced.  The 
greater  cost  of  the  additional  supply  has  no  tendency 
whatever,  either  to  raise  the  price  of  agricultural  pro- 
ducts, or  '■to  increase  the  rent.  Both  these  phenomena 
are  caused  only  by  increased  demand  for  agricultural 
products,  and  instead  of  being  intensified  they  are  miti- 
gated by  the  additional  supply,  though  at  increased  cost. 
§  165^.  The  most  important  consequence  deduced 
from  Ricardo's  theory  of  rent,  is  the  doctrine  that  "  rem 
is  not  an  element  of  the  cost  of  obtaining  agricultural pro- 
duce."  Mr.  Fawcett  asserts  this  paradox,  and  quotes 
Mr.  Buckle  as  saying,  that  this  proposition  *'  can  be 
grasped  only  by  a  comprehensive  thinker."  It  really 
seems  to  us  that  an  intellect  not  very  comprehensive  is 
quite  competent  to  perceive  that  it  is  not  true.  In  proof 
of  this  doctrine  the  supposition  is  made,  that  by  an  act 
of  the  government  all  rents  were  made  free.  Such  an 
act  of  wholesale  spoliation  it  is  claimed  would  make  agri- 
cultural products  no  cheaper  than  before.  It  is  true  that 
if  the  same  population  remained  with  the  same  wealth 
wherewith  to  purchase,  the  same  demand  would  exist  as 
before.  But  these  conditions  would  not  be  fulfilled. 
The  hundreds  of  thousands  whose  capital  is  invested  in 
lands,  and  the  still  greater  number  of  thousands  depend- 
ent on  them  for  their  employment  and  their  bread,  would 
be  deprived  of  their  living  and  reduced  to  starvation,  be- 
cause they  had  nothing  with  which  to  purchase  food. 
Their  necessities  would  therefore  be  withdrawn  from  the 
demand,  and  the  price  would  fall.  There  is  just  as 
much  propriety  in  making  the  supposition,  that  by  an  act 
of  the  government  the  wages  of  agricultural  labor  were 
abolished,  and  laborers  compelled  to  till  the  soil  without 
compensation.     If  this  could  be  accomplished  and  agri- 


RENT.  227 

cultural  laborers  still  live,  it  would  equally  be  true  that 
agricultural  products  would  be  rendered  no  cheaper  by 
this  gigantic  act  of  spoliation.  The  same  demand  would 
remain  to  be  supplied,  and  the  price  would  remain  un- 
changed. Will  these  gentlemen  therefore  allow  us  to 
make  the  inference,  that  the  labor  employed  in  the  culti- 
vation of  the  land  or  rather  the  wages  which  it  receives 
"  is  not  an  element  of  the  cost  of  obtaining  agricultural 
produce.?"  It  is  quite  true  that  if  the  holders  of  agri- 
cultural products  could  bring  them  into  the  market,  with- 
out having  incurred  any  expense  either  for  rent  or  wages, 
other  things  remaining  unchanged,  they  would  be  able 
to  obtain  the  same  prices  for  them  as  now.  But  such  a 
supposition  is  fundamentally  contradictory  to  the  very 
nature  of  ownership.  They  are  the  owners  of  what  they 
offer  in  the  market,  because  they  have  paid  both  rent 
and  wages,  and  he  who  purchases  of  them  must  of  neces- 
sity repay  not  only  wages  but  rent  also. 

§  166.  Mr.  Fawcett  speaks  of  the  supposed  act  of 
government  making  all  rents  free  as  the  "  abolition  of 
rent.'*  Such  an  act  of  tyranny  would  not  be  the  aboli- 
tion of  rent.  It  would  be  simply  taking  the  rent  from 
the  owner  of  the  land  and  giving  it  to  the  farmer  that 
for  the  time  being  tilled  it.  Suppose  a  neighbor  of  that 
farmer,  perceiving  that  great  gains  could  be  realized  by 
cultivating  land  without  paying  any  rent  for  it,  should 
apply  to  the  fortunate  incumbent  for  the  use  of  half  his 
farm.  The  prompt  reply  would  be,  you  may  have  it  if, 
as  a  private  transaction  between  you  and  me,  you  will 
pay  me  a  fair  rent  for  it.  The  farmer  understands  very 
well  that  the  tyranny  of  the  government  has  despoiled 
the  owner  of  the  land  for  his  benefit.  Why  call  such  a 
transaction  the  abolition  of  rent  ? 

No  government  can  abolish  rent  any  more  than  wages. 
We  have  shown  that  land  becomes  private  property  only 


228  ECONOMICS. 

because  of  the  labor  bestowed  upon  it  to  render  it  an 
instrument  of  human  well-being.  It  is  capital.  That 
capital  has  descended  to  the  present  owner.  Food  can 
no  more  be  produced  without  the  use  of  the  capital  in- 
vested in  the  land  than  without  the  labor  that  tills  it. 
Nor  is  this  all.  A  farm  is  in  an  important  respect 
analogous  to  the  human  body.  As  the  body  constantly 
tends  to  decay,  and  can  be  kept  in  vigor  only  by  con- 
stant repair,  so  a  farm  constantly  tends  to  revert  to  that 
natural  state  from  which  it  was  redeemed  by  labor  and 
capital,  and  more  labor  and  capital  must  constantly  be 
employed  to  preserve  it  in  a  state  of  vigorous  productive- 
ness. The  tenant  farmer  has  no  interest  in  preserving 
the  permanent  productiveness  of  the  farm,  and  will  make 
no  outlay  which  will  not  conduce  to  the  abundance  of 
the  harvest  immediately  expected.  Buildings  will  go  to 
decay,  and  all  other  permanent  improvements  will  be 
neglected  and  deteriorated.  The  original  outlay  neces- 
sary to  bring  a  farm  into  cultivation  must  in  the  course 
of  a  half  century  be  renewed  two  or  three  times,  and  at 
greatly  increased  cost.  New  and  better  dwellings  and 
out-buildings  must  be  provided,  drainage  must  be  re- 
sorted to,  more  permanent  enclosures  must  be  con- 
structed, and  generally  the  farm  must  not  only  be  saved 
from  decay  but  brought  up  to  such  a  degree  of  cultiva- 
tion, as  the  present  state  of  agriculture  demands.  A 
temporary  tenant  has  no  motive  to  provide  for  any  of 
these  things.  Ownership  and  rent  only  furnish  the 
requisite  motive.  Lands  that  have  no  owner  will  rapidly 
revert  to  their  natural  condition,  and  cease  to  produce 
food  for  man  and  beast.  Rent  is  therefore  as  necessary 
and  inevitable  an  element  in  the  cost  of  the  products  of 
the  soil,  as  the  labor  that  annually  tills  it.  The  man 
who  brings  the  produce  of  the  farm  to  market,  must 
equally  demand  compensation  for  rent  and  wages,  and 


RENT.  22$ 

the  amount  he  will  be  able  to  obtain  will  depend  on  the 
population  and  wealth  of  the  community  relative  to  the 
supply  of  his  products. 

§  167.  There  is  another  proof  equally  strong  that 
rent  is  an  ''element  in  the  cost  of  obtaining  agricultural 
produce."  It  is  an  admitted  fact,  that  England  has 
within  a  comparatively  few  years  added  nearly  one-fifth 
to  her  population,  and  yet  during  that  period  the  price 
of  agricultural  products  has  scarcely  advanced  at  all. 
It  is  also  admitted,  that  the  reason  why  the  price  of  food 
has  remained  nearly  stationary  is  to  be  found  in  the  fact, 
that  large  supplies  have  been  imported  from  other  coun- 
tries. These  supplies  have  been  largely  obtained  from 
our  own  country.  Why  is  it  then  that  agricultural  pro- 
ducts from  the  interior  of  North  America,  transported  a 
thousand  miles  by  land,  and  three  thousand  by  water, 
are  yet  offered  in  the  London  market  at  prices  so  low, 
as  to  prevent  any  advance  in  the  price  of  food  resulting 
from  so  great  an  increase  of  population  ?  It  is  not  be- 
cause these  supplies  are  derived  from  richer  land.  The 
produce  of  wheat  per  acre  in  England  is  probably  greater 
than  in  the  United  States.  It  is  not  because  they  are 
the  produce  of  cheaper  labor.  The  wages  of  agricultural 
labor  in  the  United  States  are  probably  more  than  twice 
as  great  as  in  England.  It  is  because  those  supplies 
are  derived,  from  lands  whose  rent  is  scarce  one-fifth 
what  is  paid  for  lands  of  like  productiveness  in  England. 
The  one  cheap  element  in  the  cost  of  procuring  American 
agricultural  produce  is  rent.  Every  Englishman  who  in 
these  days  eats  comparatively  cheap  bread,  should  grate- 
fully remember  the  low  rent  of  the  United  States.  When 
land  rents  in  the  region  around  Chicago  shall  approxi- 
mate, as  at  no  very  distant  day  they  will,  the  rents  of 
land  around  London,  Englishmen  must  either  eat  very 
dear  bread,  or  derive  supplies  from  other  fertile  regions 


230  ECONOMICS. 

not  yet  invaded  by  accumulated  wealth  and  dense  pop- 
ulation. Rent  is  an  element  in  the  cost  of  obtaining 
agricultural  produce. 

§  168.  It  is  also  noticeable  that  Mr.  Fawcett  himself 
does  not  after  all  derive  the  doctrine  to  which  we  object  from 
Ricardo's  theory  of  rent,  but  from  the  consideration  that 
if  all  rents  were  free,  the  same  demand  for  food  would 
still  remain,  and  therefore  prices  be  unchanged.  This 
is  admitting  precisely  what  we  contend  for,  that  the  fun- 
damental element  in  the  case  is  the  demand  which  results 
from  a  given  condition  of  wealth  and  population.  We 
trust  therefore  that  it  is  apparent  to  all  readers^  that 
Ricardo's  theory  of  rent  is  not  sustained  by  the  facts 
which  occur  in  the  origin  and  progress  of  land  culture, 
that  it  depends  for  all  its  plausibility  on  the  fallacy  of 
assuming  that  to  be  a  cause  which  is  only  an  effect,  and 
that  the  chief  consequence  which  men  have  sought  to 
deduce  from  it,  and  for  the  sake  of  which  the  theory  it- 
self has  been  for  the  most  part  defended,  contradicts 
fundamental  natural  law  and  is  quite  erroneous,  and  that 
it  is  not  even  deducible  from  the  theory  itself  We  can- 
not refrain  from  expressing  our  wonder,  that  this  theory 
and  the  paradoxical  inference  which  men  have  sought  to 
deduce  from  it,  can  have  for  fifty  years  maintained  their 
position  as  fundamental  laws  of  the  science.  We  can 
only  explain  the  fact  by  the  consideration,  that  the  gen- 
eral belief  of  the  doctrine  that  rent  is  not  an  element  in 
the  cost  of  agricultural  produce  is  fitted  to  afford  power- 
ful support  to  those  land  monopolies  which  have  been 
very  prevalent  in  European  history,  and  one  of  which 
still  prevails  in  respect  to  the  tenure  of  almost  all  the 
lands  in  Britain.  Of  this  subject  however  we  shall  speak 
hereafter. 

§  169.  It  is  also  noticeable  that  the  same  fallacy  is  re- 
sorted to  in  explaining  the  price  of  minerals  when  the  rela- 


RENT.  23 1 

Hon  of  demand  to  supply  is  changed.  If  for  example  the 
demand  for  iron  should  at  any  time  increase  beyond 
what  existing  mines  could  supply,  or  if  demand  remain- 
ing the  same  the  supply  afforded  by  existing  mines  should 
diminish,  the  price  would  rise.  It  is  claimed  that  the 
reason  of  this  rise  in  price  is  to  be  found  in  the  fact  that 
less  productive  mines  must  be  wrought,  requiring  a 
greater  amount  of  labor  and  capital  to  obtain  a  given 
amount  of  metal.  This  is  incorrect.  The  price  has 
risen  only  because  the  demand  relative  to  the  supply  has 
increased.  The  price  of  the  metal  would  have  been  still 
more  increased  if  there  had  been  no  other  mines  that 
could  be  resorted  to.  Less  productive  mines  are  wrought 
because  the  increased  price  of  the  metal  makes  it  profit- 
able to  work  mines  which  at  former  prices  could  have 
been  worked  only  at  a  loss.  The  working  of  a  less  pro- 
ductive mine  is  therefore  effect  and  not  cause.  The 
principle  will  hold  in  all  similar  cases.  Ricardo's  theory 
of  rent  will  be  found  to  involve  the  same  fallacy  wher- 
ever it  is  applied. 

It  is  quite  correct  however  in  certain  cases  to  speak 
of  the  cost  of  production  as  having  been  increased,  or  of 
the  cost  of  living  as  having  been  advanced  by  the  neces- 
sity of  deriving  supplies  from  more  costly  sources.  If  by 
the  utter  failure  of  the  coal  supply  of  England,  she  were 
compelled  to  obtain  all  which  she  uses  from  the  coal 
mines  of  North  America,  the  costliness  of  her  manufac- 
tures would  truly  be  said  to  be  caused  by  the  necessity 
of  deriving  supplies  from  more  costly  sources.  But  if,  the 
coal  supply  of  England  remaining  unimpaired,  the  de- 
mand for  coal  should  in  any  way  be  so  much  increased 
and  the  price  of  it  so  much  raised,  that  it  could  be  car- 
ried from  North  American  mines,  and  sold  in  England 
at  a  profit,  it  would  surely  not  be  sound  philosophy  to 
ascribe  the  enhanced  price  of  coal  in  England  to  the 


232  ECONOMICS. 

necessity  of  transporting  it  across  the  Atlantic.  The 
price  would  have  been  much  more  enhanced,  if  there  had 
been  no  American  coal  to  transport. 


CHAPTER   IX. 


Profit 

§  170.  Another  form  which  the  gains  of  the  capi- 
talist assume  is  profit.     It  is  next  to  be  considered. 

Definition.  Profit  is  the  compensation  which  the  capi- 
talist receives  from  employing  his  capital  in  any  process  of 
production  or  exchange. 

It  differs  from  interest  in  embracing  a  greater  num- 
ber of  elements.  Interest  is  compensation  for  the  use 
of  capital,  and  such  ordinary  risk  as  one  must  for  the 
most  part  incur  when  he  entrusts  it  to  another.  Profit 
embraces  interest  on  the  capital  employed,  and  in  ad- 
dition to  it  compensation  for  the  peculiar  risk  which  is 
incidental  to  the  modes  in  which  capital  is  employed, 
and  for  the  labor,  skill  and  pains-taking  of  the  capitalist 
in  superintending  and  directing  the  process.  The  inter- 
est element  in  profit  of  course  varies  with  the  variations 
of  the  rate  of  interest.  A  capitalist  will  expect,  in  addi- 
tion to  compensation  for  the  risks  of  trade,  and  his  own 
personal  services,  such  a  rate  of  interest  as  his  capital 
would  command  in  the  market.  He  will  of  course  not 
take  into  the  account  the  minor  almost  daily  fluctuations 
of  the  rate  of  interest  which  are  liable  to  occur,  but  the 
more  permanent  changes  in  the  interest  market  will  be 
taken  into  the  account  in  determining  what  rate  of  profit 
will  be  satisfactory.     Any  capitalist  would  be  willing  to 


PROFIT.  233 

engage  in  any  business  with  a  prospect  of  much  less 
profit  when  the  current  rate  of  interest  was  five  per  cent 
than  when  it  was  ten  per  cent. 

Of  course  profit  must  closely  sympathize  with  interest 
in  that  steady  decline  of  the  rate  which,  as  has  been 
shown,  is  always  occasioned  by  the  increasing  wealth 
and  civilization  of  a  community.  As  society  becomes 
more  mature,  it  will  not  only  become  easier  for  laborers 
possessing  skill,  industry  and  integrity,  to  borrow  what 
they  need  in  aid  of  their  labor,  but  all  commodities  into 
the  production  of  which  capital  enters  will  be  produced 
at  lower  prices,  or  at  least  brought  more  within  the  reach 
of  all  classes  of  the  community,  in  consequence  of  the 
abundance  of  capital  and  the  smallness  of  the  rate  of 
profit.  As  already  admitted  for  reasons  shown,  agricul- 
tural products  are  not  subject  to  this  law. 

§  171.  In  this  as  in  all  other  departments  of  our  sci- 
ence competition  is  the  supreme  law.  It  is  frequently  as- 
serted that  competition  will  reduce  the  rate  of  profit  in 
all  the  different  modes  of  employing  capital  to  a  common 
standard.  This  cannot  be  admitted.  It  would  be  true 
if  all  the  other  elements  that  come  into  consideration  in 
choosing  the  mode  in  which  one's  capital  is  to  be  em- 
ployed were  equal.  But  they  are  far  from  being  equal. 
Some  modes  of  employing  capital  necessarily  involve 
great  risk,  others  very  little.  If  capital  is  to  be  em- 
ployed in  manufacturing  gunpowder  or  in  purchasing  a 
steam.boat  to  run  upon  our  Western  rivers,  it  will  be  ex- 
posed to  great  risk,  and  no  man  will  make  such  an  in- 
vestment without  a  prospect  of  profits  large  enough  to 
insure  him  against  this  risk.  Other  modes  of  employing 
capital  are  very  numerous  in  which  no  such  extraordinary 
risk  is  incurred.  Men  can  afford  to  engage  in  such 
branches  of  trade  at  a  much  lower  rate  of  profit,  and 
competition  will  therefore  settle  the  rate  of  profit  in  them 


234  ECONOMICS. 

at  a  much  lower  point.  Before  engaging  in  any  branch 
of  business,  prudent  men  will  insist  on  a  prospective  rate 
of  profit,  which  will  fully  insure  them  against  all  its  fore- 
seen risks. 

Some  modes  of  employing  capital  compel  the  cap- 
italist to  engage  in  occupations  which  are  disagreeable,  or 
are  not  held  in  much  respect  and  honor  by  the  community. 
Few  capitalists  will  desire  such  investments,  and  conse- 
quently those  who  are  willing  so  to  invest  their  capital 
will  encounter  very  little  competition,  and  therefore  ob- 
tain compensation  for  the  undesirableness  of  the  occupa- 
tion itself  in  other  respects  by  a  high  rate  of  profit.  It 
is  to  be  deeply  regretted  that  not  a  few  capitalists  are 
found  who  are  willing  to  accept  high  profit  as  a  com- 
pensation for  violated  conscience,  and  are  therefore  will- 
ing to  invest  their  capital  in  producing  that  which  is 
destructive  of  the  prosperity,  the  happiness  and  the  vir- 
tue of  those  from  the  indulgence  of  whose  appetites  their 
profits  are  derived. 

Other  employments  of  capital  are  agreeable  and  re- 
garded by  the  community  as  conferring  dignity  and  respect- 
ability on  those  who  successfully  engage  in  them.  They 
are  apt  to  acquire  a  high  social  position  for  themselves 
and  their  families.  Men  are  often  willing  to  invest  their 
capital  in  such  employments  for  very  little  profit  above 
bare  interest  and  risk.  They  regard  their  personal  ser- 
vices as  in  a  great  degree  compensated  by  the  dignity, 
respectability  and  desirable  mode  of  life  which  they  en- 
joy. Of  course  there  is  great  competition  for  such  in- 
vestments, and  the  rate  of  profit  is  very  low. 

§  172.  These  considerations  are  quite  sufficient  to 
show  that  so  far  is  it  from  being  true  that  competition 
reduces  the  rate  of  profit  in  different  modes  of  employing 
capital  to  a  common  standard,  it  must  necessarily  result 
in  producing  very  wide  diversities  in  this  respect.     One 


PROFIT.  235 

law  does  however  prevail  through  every  department  of 
trade.  Every  mode  of  investing  capital  does  find  its 
own  level.  //  does  establish  a  rate  of  profit  which  is  natural 
and  proper  for  itself  Competition  will  clearly  determine 
how  much  weight  all  the  advantages  and  disadvantages 
of  any  investment  have  in  men's  minds,  and  what  rate 
of  profit  will  be  accepted  in  each  particular  investment. 
Whenever  in  any  case  profits  are  found  to  exceed  that 
natural  rate,  capital  will  have  a  tendency  to  leave  other 
modes  of  employment  and  flow  towards  that  in  which 
the  excess  exists,  and  will  continue  to  flow,  not  till  all 
profits  are  equalized,  but  till  each  mode  of  investment 
has  its  own  proper  rate  of  profit,  after  all  advantages  and 
disadvantages  have  been  duly  considered.  There  is  not 
equality  but  a  constant  tendency  to  equilibrium  of  rates 
of  profit. 

This  law  is  not  however  so  stringent  as  not  to  leave 
room  for  wide  diversities  of  the  rate  of  profit  in  different 
establishments  employed  in  the  same  trade.  Personal 
characteristics  may  exert  very  great  influence.  Superior 
sagacity,  wisdom  and  skill  in  management  may  obtain 
ample  compensation  by  raising  the  profit  far  above  the 
general  average,  and  this  sort  of  superiority  can  only  be 
reached  by  the  competition  of  other  men  possessing 
equally  eminent  qualities  in  the  management  of  affairs. 
No  free  competition  can  deprive  any  man  of  the  full  ben- 
efit of  his  own  wisdom  and  skill. 

In  an  order  of  things  in  which  competition  is  not  in- 
terfered with  by  any  impolitic  legislation,  it  will  deter- 
mine with  unerring  accuracy  what  branches  of  industry 
7nay  be  most  profitably  piirsued  in  any  place  at  a  given  time. 
If  any  commodity  is  ofi"ered  in  the  market  at  a  cheaper 
rate  than  that  at  which  it  can  be  manufactured  there  and 
then,  it  is  proof  conclusive  that  the  capital  of  that  com- 
munity cannot  be  profitably  employed  in  manufacturing 


236  ECONOMICS. 

it.  1  ne  reason  why  it  cannot  is,  that  it  is  already  em 
ployed  in  producing  something  else  which  yields  a  higher 
profit.  Any  legislation  which  so  obstructs  the  introduc- 
tion of  that  commodity  into  the  market,  as  so  to  raise 
its  price  that  capital  can  be  profitably  employed  in  pro- 
ducing it,  is  simply  compelling  the  people  to  pay  more 
for  that  commodity  than  its  real  value,  and  creating 
artificial  motives  to  induce  capitalists  to  withdraw  from 
more  profitable  investments  and  engage  in  those  that  are 
less  profitable.  It  is  taxing  the  community  to  pay  cap- 
italists for  wasting  their  capital. 

§  173.  All  this  goes  on  the  supposition  that  the  in- 
vestment of  capital  is  left  to  be  determined  by  perfectly 
free  competition.  In  speaking  of  wages,  we  were  at  con- 
siderable pains  to  ascertain  to  what  extent  the  influence 
of  competition  may  be  modified  by  combinations  to  resist 
it.  It  is  equally  important  here  to  inquire  to  what  extent 
the  same  natural  force  may  be  modified  or  counteracted  by 
combinations  of  capital.  It  is  alleged  that  where  a  vast 
fortune  is  owned  by  one  person  and  therefore  managed 
by  a  single  intellect  and  a  single  will,  such  a  capitalist 
may  and  often  does  obtain  the  control  of  the  entire  sup- 
ply of  some  commodity  for  perhaps  a  whole  nation,  and 
thus  become  able  to  exempt  it  entirely  from  the  influ- 
ence of  competition,  and  set  his  own  arbitrary  price  upon 
it.  It  is  also  asserted  that  where  this  cannot  be  done 
by  a  single  capitalist,  it  can  be  by  a  combination  of 
capitalists  whose  interests  are  common.  It  is  plain 
that  the  best  possible  protection  of  the  community 
against  such  oppressive  combinations  is  the  widest 
freedom  of  trade.  If  an  exclusive  commercial  system 
falsely  called  "protection  of  domestic  industry  "  confines 
the  supply  of  some  commodity  to  a  small  number  of 
easily  accessible  sources,  as  for  example  to  a  single 
country^  a  monopoly  of  that  commodity  in  one  or  a  few 


PROFIT.  237 

hands  is  rendered  easy,  and  the  community  may  be  ex- 
pected to  suffer  from  such  exactions,  and  a  community 
determined  to  maintain  such  legislation  should  utter  no 
complaints  of  being  oppressed  by  combinations  of  capi- 
tal. "  Protection  "  of  the  producers  of  a  commodity  thus 
monopolized  is  protection  of  a  combination  of  grasping 
capitalists  united  in  a  league  to  practice  gigantic  exac- 
tions upon  a  community,  whose  exclusive  legislation  has 
rendered  it  powerless  to  resist  them.  It  is  a  strange 
state  of  things  and  not  very  agreeable  to  contemplate, 
when  a  duty  nearly  prohibitory  on  the  one  hand  dis- 
countenances the  introduction  of  the  coal  of  British 
America  into  the  seaports  of  the  New  England  and  Mid- 
dle States,  while  on  the  other  hand  a  combination  of  the 
Pennsylvania  coal  companies  is  assisted  by  that  "  Protec- 
tion," for  months  and  years  in  succession,  to  exact  from 
ten  millions  of  the  American  people  such  prices  for  their 
coal  as  their  arbitrary  will  dictates,  screened  from  foreign 
competition  in  order  that  they  may  succeed  in  strangling 
all  competition  at  home.  Such  an  anomaly  our  people 
have  endured  and  patiently  tolerated  under  the  paralys- 
ing influence  of  the  nightmare  of  *'  Protection."  Under 
such  laws  combinations  of  capital  in  particular  lines  of 
industry  to  dictate  arbitrary  prices  to  all  the  rest  of  the 
community  will  always  be  easy  and  of  frequent  occur- 
rence. The  only  protection  of  the  community  against 
the  coal  monopolies  is  free  trade  in  coal,  and  if  the  com- 
munity has  not  intelligence  and  spirit  enough  to  demand 
the  application  of  that  remedy,  it  richly  deserves  to  suf- 
fer all  the  exactions  which  those  monopolies  can  impose. 
But  if  our  ports  are  open  to  the  trade  of  all  the  world, 
subject  to  no  other  imposts  than  those  that  are  strictly 
necessary  for  purposes  of  revenue  only,  such  combina- 
tions can  very  seldom  be  successful,  and  will  be  rendered 
too  hazardous  to  be  often  attempted. 


238  ECONOMICS. 

It  must  however  be  admitted  that  there  are  a  {e\t 
cases  in  which  the  supply  of  some  important  commodity 
is  by  the  nature  of  the  case  so  much  confined  to  a  very  few 
hands,  as  to  render  the  success  of  such  a  combination 
possible,  and  in  the  present  condition  of  the  public  mind 
in  this  country,  not  improbable.  Petroleum  is  an  ex- 
ample of  this.  Our  great  parallel  lines  of  railway  be- 
tween the  interior  and  the  Atlantic  coast  furnish  another 
example.  In  either  of  these  cases  it  is  difficult  to  see 
what  means  the  people  have  of  protecting  themselves 
against  exactions,  which  at  first  view  seem  limitless. 
Are  they  limitless? 

§  174.  The  competition  that  naturally  exists  in  the 
case  is  between  capital  in  one  particular  mode  of  invest- 
ment and  all  other  capital.  Those  interested  in  the  one 
mode  of  investment  are  seeking  by  combination  arbitra- 
rily to  dictate  prices  to  all  the  rest  of  the  world.  Such 
an  attempt  is  in  the  long  run  very  likely  to  prove  self- 
destructive.  The  petroleum  trade  will  suffice  for  an 
illustration.  Within  a  few  months  a  combination  of 
holders  has  nearly  doubled  the  price  of  that  commodity 
to  the  consumer.  The  consequence  must  eventually  be 
a  greatly  diminished  demand.  All  other  modes  of  arti- 
ficial illumination  will  be  resorted  to  more  freely  than 
before.  Less  artificial  light  will  be  used  on  account  of 
increasing  economy,  and  the  area  over  which  petroleum 
will  bear  to  be  transported  will  be  diminished.  Dis- 
covery and  invention  will  also  be  stimulated  to  search 
after  other  methods  of  illumination,  and  other  sources  of 
supply.  More  recently  it  is  announced  that  the  com- 
bination is  falling  to  pieces  by  the  Canadian  confeder- 
ates refusing  to  abide  by  the  terms  of  it.  Would  it  not 
be  wise  for  our  government  to  aid  those  American  capi- 
talists who  are  struggling  hard  to  maintain  so  praise- 
worthy a  combination,  by  imposing  a  prohibitory  dut^ 


PROFIT.  239 

on  petroleum  produced  elsewhere  than  in  our  own  coun- 
try ?  This  would  at  least  be  a  consistent  carrying  out 
of  our  policy  in  respect  to  coal.  Who  stands  ready  to 
prove  his  consistent  statesmanship,  by  introducing  a  bill 
for  that  purpose  in  Congress  ? 

§  175.  The  great  railway  combination  referred  to  above 
is  one  of  still  greater  interest  and  importance.  These 
lines  of  road  seem  to  possess  the  power  of  combining  to 
establish  the  rates  of  transportation  both  for  freight  and 
passengers  at  any  point  they  may  agree  upon.  Thus  a 
small  number  of  railway  magnates  seem  to  possess  a 
power  of  taxation,  which  if  not  unlimited  is  at  least  of 
very  indefinite  extent.  It  is  true  they  have  sometimes  a 
good  deal  of  difficulty  in  agreeing  together  what  that 
fixed  point  shall  be,  and  while  they  disagree,  the  com- 
munity enjoys  a  season  of  temporary  relief.  But  for  the 
most  part  they  are  agreed,  and  the  public  has  only  to  pay 
the  prices  which  they  impose.  The  excitement  of  the 
public  mind  on  this  question  has  been  intense,  though 
often  we  think,  neither  intelligent  nor  wise.  The  doc- 
trine has  been  widely  inculcated  that  the  public  has 
peculiar  rights  in  the  case,  growing  out  of  the  fact  that 
railways  are  held  and  worked  under  acts  of  incorpora- 
tion granted  by  the  legislature,  and  not  by  individual 
capitalists.  But  is  it  not  evident  that  their  rights  and 
privileges  are  neither  more  nor  less  than  individual  cap- 
italists would  possess  in  like  circumstances  ?  The  evil 
lies  in  the  ease  with  which  they  can  control  an  immense 
capital  by  the  power  of  a  single  will.  But  this  does  not 
result  at  all  from  the  fact  that  they  are  corporate  and  not 
natural  persons,  but  from  the  greatness  of  the  enter- 
prises and  the  vast  amount  of  capital  necessary  for  their 
construction  and  working.  It  cannot  be  denied  that 
these  great  corporations  do  often  for  months  and  even 
years  in  succession  so  combine  as  to  a  great  extent  to 


240  ECONOMICS. 

set  the  law  of  competition  at  defiance.  When,  on  the 
occasion  of  ascertaining  that  the  crop  of  Indian  corn  in 
the  great  interior  for  a  certain  year  was  much  larger  than 
usual,  the  "  representatives  of  the  great  competing  lines  " 
spent  a  social  evening  together  at  Fifth  Avenue  Hotel, 
and  closed  the  pleasant  interview  by  adding  ten  cents  to 
the  freight  of  a  bushel  of  Indian  corn  from  the  Mississippi 
to  the  Atlantic  coast,  the  public  were  confounded,  the 
economists  were  made  acquainted  with  a  new  law  of 
price,  but  neither  the  public  nor  the  economists  saw 
any  way  of  evading  the  tax  so  unceremoniously  im- 
posed. No  one  has  yet  succeeded  in  showing  how  these 
corporations  can  be  made  amenable  to  the  law  of  com- 
petition. 

Not  only  do  such  combinations  set  aside  competition 
in  determining  the  price  of  transportation,  but  cases  cer- 
tainly have  not  been  wanting,  in  which  a  great  railway 
company  has  been  able  to  exert  such  an  influence  on  the 
Legislature,  as  to  prevent  the  chartering  of  any  parallel  line 
to  cotnpete  with  it,  and  thus  to  prolong  the  monopoly  in- 
definitely for  the  future. 

§  176.  This  last  mentioned  evil  could  be  easily 
remedied.  Instead  of  granting  a  special  charter  to  each 
railway  company,  all  should  be  constructed  under  the  pro- 
visions of  a  general  railway  law.  Any  capitalists  might 
then,  by  simply  complying  with  the  provisions  of  the  law, 
construct  a  railway  wherever  they  might  think  it  would 
yield  a  profit,  and  all  capital  invested  in  railways  would 
be  constantly  liable  to  encounter  new  competition.  Such 
liability  would  be  a  great  protection  to  the  interests  of 
the  public.  The  remedy  is  to  be  sought,  as  in  a  great 
many  other  instances,  in  allowing  the  largest  freedom 
for  the  investment  of  capital. 

This  however  affords  no  security  against  combination 
of  parallel  lines.     If  we  are  correctly  informed  a  recent 


PROFIT.  241 

decision  of  the  supreme  court  of  the  United  States  sanc- 
tions the  principle,  that  the  Legislature  may  prescribe 
by  law  a  maximum  rate  of  transportation.  Such  a  law 
wisely  drawn  would  probably  afford  the  public  consider- 
able protection.  But  that  decision  of  the  supreme  court 
does  not  reach  far  toward  the  root  of  the  evil.  Fixing 
prices  by  law  is  not  much  more  in  harmony  with  sound 
principles  of  economy,  than  dictating  them  by  the  will  of 
one  of  the  parties.  All  economic  arrangements  must  be 
elastic.  Prices  cannot  be  uniform.  They  refuse  to  be 
regulated  by  any  cast  iron  rule.  Rates  of  transportation 
which  would  be  exorbitant  at  one  time,  or  in  one  set  of 
circumstances,  would  be  ruinously  low  in  other  cases. 
Man  has  not  yet  discovered  any  other  method  by  which 
prices  can  be  equitably  adjusted  except  that  of  competi- 
tion. If  railways  reject  that  method  it  is  difficult  to  see 
how  it  is  possible  to  make  the  law  supply  its  place. 

§  177.  The  public  ought  to  find  protection  in  the 
sagacity^  integrity  atid  wisdom  of  the  men  who  manage  our 
great  lines  of  railway.  Nothing  can  be  more  evident, 
than  that  the  prosperity  of  these  great  companies  will 
always  depend  on  the  prosperity  of  the  great  interior, 
especially  on  its  agricultural  prosperity.  In  an  enlight- 
ened view  of  things,  the  real  interests  of  the  railways 
will  be  best  promoted,  by  enabling  the  farmers  of  the 
interior  to  transport  the  products  of  their  farms  to  the 
markets  of  the  world  at  the  lowest  rate  which  will  afford 
a  reasonable  compensation  to  the  carriers.  That  will 
stimulate  production  to  the  greatest  possible  activity, 
and  insure  to  the  railways  a  constantly  increasing  amount 
of  traffic,  the  profits  ol  which  under  the  law  of  competi 
tion  will  rapidly  increase  for  a  long  time  to  come.  It  is 
evident  that  the  agricultural  productions  of  that  vast  in- 
terior region  and  especially  the  growth  of  maize  can  be 
indefinitely  increased,  with  scarcely  any  increase  of  the 
It 


242  ECONOMICS. 

cost.  It  would  be  about  as  easy  to  double  the  agri^ 
cultural  products  of  that  portion  of  our  country,  as  to 
double  the  quantity  of  woolen  and  cotton  cloths  produced 
in  England.  Increase  of  demand  is  the  only  lacking 
condition  of  an  almost  indefinite  increase  of  the  agricul- 
tural products  of  the  Mississippi  Valley.  If  the  great 
railway  companies  study  their  own  real  in^erests,  they 
will  encourage  and  foster  and  not  oppress  that  greatest 
of  American  industries.  In  such  a  case  a  selfish  and 
grasping  policy  would  be  unwise  and  suicidal.  In  speak- 
ing of  the  combinations  of  laborers  to  raise  wages  above 
the  natural  rate,  we  had  occasion  to  point  out  the  dan- 
ger of  arresting  the  natural  increase  of  capital  and  palsy- 
ing the  hand  that  feeds.  The  same  danger  exists  how- 
ever on  the  other  side.  It  is  admitted  that  capitalists 
are  apt  to  be  sagacious,  but  it  must  also  be  admitted 
that  they  are  often  too  greedy  of  immediate  gain  to  be 
truly  wise.  Whoever  will  devise  a  method  of  establish- 
ing a  rate  of  transportation  on  these  great  lines  of  rail- 
way on  the  basis  of  open  and  equal  competition,  will 
doubtless  confer  a  great  benefit  on  all  the  parties  con- 
cerned. Surely  while  these  great  companies  set  so 
stupendous  an  example  of  combination  to  resist  compe- 
tition, no  one  should  be  surprised  that  their  employes 
combine  for  higher  wages,  and  that  every  where  strikes 
are  of  very  frequent  occurrence.  Such  examples  in  high 
places  are  very  likely  to  be  followed. 

§  178.  We  cannot  however  refuse  to  admit,  that 
this  railway  problem  is  in  some  of  its  aspects  compli- 
cated and  difficult.  The  occurrence  of  an  exceptionally 
large  harvest  in  the  interior  of  the  country  presents  some 
questions  of  real  difficulty,  which  are  not  always  con- 
sidered. On  the  one  hand  should  the  railways  attempt 
to  transport  all  which  should  be  offered,  at  rates  of 
moderate  profit  to  the  stockholders,  it  would  probably 


PROFIT.  243 

be  many  months  before  the  necessary  amount  of  "  roll- 
ing stock"  could  be  procured  to  meet  the  demand. 
The  prompt  filling  of  all  orders  would  be  impossible. 
On  the  other  hand  if  the  railway  companies  should  make 
haste  to  procure  the  necessary  equipment,  as  soon  as 
that  emergency  was  over,  their  ''  rolling  stock  "  would 
greatly  exceed  their  needs,  and  a  large  amount  of  unused 
capital  would  be  on  their  hands. 

It  should  also  be  borne  in  mind,  that  if  it  were  pos- 
sible to  send  promptly  to  the  great  markets  all  which 
would  be  offered  at  moderate  freight  rates,  the  supply  in 
those  markets  would  be  so  greatly  m  excess  of  de7na?id,  as  to 
reduce  the  price  to  a  point  ruinously  below  the  cost  of 
production,  and  thus  prove  very  injurious  to  the  farmers 
themselves.  If  competition  could  be  brought  to  bear  in 
determining  freight  rates,  it  is  certain  those  rates  would 
be  greatly  raised  in  such  a  case.  The  case  may  not 
differ  much  from  the  practice  of  the  Bank  of  England,  to 
raise  the  rate  of  discount,  when  pressed  with  more  appli- 
cations for  discount  than  it  can  safely  grant.  It  accom- 
modates those  who  pay  highest.  At  low  rates  of  freight 
it  is  certain  the  roads  can  not  carry  all  which  in  such  cir- 
cumstances would  be  offered.  To  raise  the  freight  rates 
is  the  only  method  of  reducing  the  amount  of  work  de- 
manded, within  the  limits  of  possible  performance.  It 
should  also  be  noticed  that  this  mode  of  procedure 
comes  fairly  within  the  limits  of  the  law  of  competition. 
The  arbitrariness  of  the  proceeding  may  be  more  appa- 
rent than  real.  It  may  be  only  saying,  we  cannot  accom- 
modate all.  we  will  serve  those  who  will  pay  best.  An 
honorable  private  gentleman  in  any  profession  might 
feel  himself  quite  at  liberty  to  say  the  same.  To  one 
who  stands  at  a  little  distance  and  surveys  this  contest, 
wisdom  and  justice  would  seem  to  unite  in  requiring, 
that  these  great  companies  should  at  all  times  provide 


244  ECONOMICS. 

such  an  equipment  as  experience  has  shown  can  be  kept 
OR  hand  with  profit,  to  fix  the  medium  price  of  transpor- 
tation at  rates  of  fair  profit,  and  to  raise  the  rates  when 
the  traffic  exceeds  the  capabilities  of  the  line,  and  reduce 
them  again  when  the  extraordinary  demand  ceases.  If 
the  public  could  know,  that  the  great  competing  lines  are 
conducted  on  this  principle,  all  reasonable  men  would 
be  satisfied  that  competition  has  all  the  influence  it  can 
have  in  such  a  case.  If  to  this  it  is  replied  that  the  line 
which  should  be  conducted  in  this  way  would  be  ruined 
by  the  competition  of  parallel  lines,  it  is  perhaps  a  suf- 
ficient answer  to  say,  that  since  it  is  plain  the  railway 
companies  do  not  trust  one  another,  it  is  perhaps  not 
strange  that  the  public  does  not  implicitly  trust  them. 

We  must  leave  this  subject  with  the  conviction,  that 
in  the  present  circumstances  of  society,  the  public  has  no 
very  satisfactory  assurance^  that  there  are  not  some  cases  in 
which  capitalists  devoted  to  particular  industries  can^  by 
combinations  for  the  purpose^  protect  themselves  from  free 
ajid  open  competition  for  periods,  and  perhaps  for  long 
periods,  and  thus  exact  upon  the  public  according  to 
their  own  arbi^^rary  wills.  If  this  is  so,  these  cases  must 
be  taken  from  the  court  of  economics — it  cannot  deal 
with  them—  and  referred  to  that  of  ethics.  If  such  cases 
really  exist,  the  question  will  fairly  meet  us,  to  what  ex- 
tent honorable  men  can  avail  themselves  of  such  oppor- 
tunities of  arbitrary  exaction. 

§  179.  It  cannot  be  denied  that  some  inevitable  evils 
are  connected  with  the  aggregation  of  large  masses  of 
capital  under  a  single  management.  But  there  are  ad- 
vantages also  which  civilization  can  not  dispense  with. 
Without  such  aggregations,  those  vast  enterprises  which 
form  the  most  striking  characteristic  of  our  times  would 
be  impossible.  In  many  other  cases  in  which  they  are 
not  absolutely  indispensable,  they  greatly  increase  the 


CONDITIONS    OF    FREE   COMPETITION.  245 

productive  power  of  capital.  Large  establishments  are, 
from  the  very  fact  that  they  are  large,  often  much  more 
profitable  than  small  ones.  It  costs  nearly  as  much  to 
superintend  a  small  operation  as  a  great  one.  Motive 
power  can  often  be  much  more  economically  used  in  a 
large  establishment.  There  are  many  other  expenses 
which  do  not  by  any  means  increase  in  proportion  to  the 
size  of  the  establishment.  In  many  branches  of  industry 
these  advantages  are  so  great,  that  if  the  demand  were 
not  greater  than  the  large  establishments  could  supply, 
competition  would  drive  the  small  establishments  out  of 
the  trade.  But  the  forming  of  large  combinations  of 
capital  is  not  always  easy.  The  demand  for  the  com- 
modity produced  must  therefore  be  still  partially  supplied 
from  smaller  establishments.  The  larger  will,  however, 
other  things  being  equal,  enjoy  larger  profits. 


CHAPTER  X. 


Underlying  Conditions  of  Free  Competition, 

§  180.  In  the  whole  progress  of  this  treatise  thus 
far,  we  have  been  following  the  law  of  competition  in  its 
application  to  all  the  various  phenomena  of  labor  and 
capital.  It  seems  desirable,  before  proceeding  to  the 
remaining  questions  to  be  discussed,  to  point  out  and 
insist  on  three  underlying  conditions  of  the  sound  and 
healthful  working  of  competition.  These  three  condi- 
tions are, 

1.  Perfect  freedom  of  exchange  in  all  circumstances. 

2.  Such  a  degree  of  intelligence  in  both  parties  to  any 


246  ECONOMICS. 

transaction^  as  will  place  them  on  a  footing  of  substantial 
equality. 

3.  Moral  i?itegrity. 

By  insisting  on  perfect  freedom  of  exchange,  we  do 
not  object  to  the  right  of  society  to  protect  itself  against 
any  trade  which  is  destructive  of  health  and  morals. 
Against  all  such  trades  it  is  the  duty  of  the  government 
to  protect  the  community  as  truly  as  against  the  conta- 
gion of  small-pox.  But  in  respect  to  all  articles  not  in- 
jurious to  society,  and  possessing  exchangeable  value, 
freedom  of  exchange  is  a  fundamental  law  of  humanity. 
Many  of  us  fail  to  see  how  profoundly  fundamental  it  is. 
Its  import  may  be  thus  generalized.  It  is  a  first  law  of 
society  that  he  who  offers  a  higher  value  for  anything 
than  any  one  else  >offers  for  it,  or  sets  upon  it,  is  the 
natural  owner  of  it,  and  in  the  view  of  a  sound  economy 
should  meet  no  obstacles  in  becoming  the  actual  owner 
of  it.  In  our  previous  discussion  we  have  vindicated 
such  freedom  of  exchange  in  respect  to  the  commodities 
of  commerce,  and  in  respect  to  all  transactions  between 
employers  and  employes.  But  there  is  one  application 
of  the  principle  which  it  seems  quite  necessary  to  insist 
on,  before  we  proceed  further,  for  to  talk  of  free  compe- 
tition without  the  fulfillment  of  this  condition,  is  in  many 
cases  to  delude  ourselves  with  words  which  can  have  no 
meaning.  We  refer  to  the  application  of  freedom  of  ex- 
change to  the  tenure  of  land. 

181.  The  ownership  of  land  which  is  acquired  by 
labor  bestowed  on  it  is  absolute  and  entire.  It  includes 
not  only  the  right  to  hold  and  use  and  enjoy,  but  the 
right  to  exchange  it  for  anything  which  the  owner  re- 
gards as  more  desirable.  A  law  which  renders  the  latid 
inalienable  is  a  direct  violatioji  of  this  natural  ownership. 
It  may  be  that  the  present  owner  of  a  farm  derives  his 
title  to  it  by  inheritance  from  an  ancestry  that  never 


CONDITIONS   OF    FREE    COMPETITION.  247 

possessed  such  absolute  ownership.  Their  title  ma^ 
have  originated  from  the  grant  of  a  conqueror  who  held 
it  only  by  the  law  of  force.  But  it  is  now  impossible  to 
repair  that  act  of  violence,  by  restoring  the  title  to  the 
natural  heirs  of  those  from  whom  it  was  wrested.  The 
real  owners  are  the  present  holders.  The  present  value 
of  the  land  is  due  to  the  capital  and  labor  which  they 
and  those  from  whom  they  inherit  have  bestowed  upon 
it,  and  the  law  should  recognize  the  absoluteness  of  their 
title,  by  removing  all  obstacles  to  the  freedom  of  ex- 
change. The  present  owner  may  have  no  taste  for  agri- 
cultural pursuits^  and  no  talentfor  prosecuting  them  suc- 
cessfully. Land  is  not  therefore  the  instrument  which 
he  needs  to  aid  the  work  of  his  life,  and  will  therefore 
never  in  his  hands  be  brought  up  to  its  full  productive 
power,  and  never  render  to  humanity  the  service  of  which 
it  is  capable.  He  will  pursue  perhaps  the  line  of  life 
for  which  he  is  qualified  by  his  taste  and  his  talents  under 
a  great  disadvantage,  because  the  instrument  which  he 
possesses  is  not  that  which  he  needs. 

Near  by  him  is  one  who  has  both  taste  and  talent  for 
an  agricultural  life^  but  he  has  no  land.  That  farm  is 
the  very  instrument  which  he  needs  to  aid  the  labor 
which  he  is  best  fitted  to  do.  He  is  able  and  willing  to 
give  for  it  a  sum  of  money  which  seems  to  the  owner  of 
the  farm  much  more  desirable  than  the  farm,  because 
with  it  he  can  obtain  the  instruments  and  helps  that 
will  aid  him  in  the  work  of  his  life.  If  now  he  owns  the 
land  in  fee  simple  and  no  unnecessary  obstacles  obstruct 
the  transfer,  he  will  exchange  it  for  the  money,  and 
both  parties  will  thereby  be  greatly  benefited.  But  if  he 
holds  it  by  an  inalienable  tenure,  or  the  transfer  is  en- 
cumbered by  many  difficulties  and  expenses,  the  farm 
will  probably  remain  comparatively  unproductive,  his 
own  labor  must  be  done  under  a  life-long  disadvantage, 


248  ECONOMICb. 

and  his  neighbor  must  shift  as  well  as  he  can  without  the 
land  he  needs.  It  requires  no  argument  to  show,  that 
the  exemption  of  that  land  from  the  freedom  of  exchange 
is  hurtful  to  every  person  interested  in  the  ownership  of 
it,  and  to  the  whole  community.  Nature's  beneficent 
system  is  interfered  with,  one  of  her  fundamental  laws  is 
violated. 

§  182.  Let  us  not  leave  this  topic  till  we  have  some 
correct  conception  how  widely  this  mischief  spreads  it- 
self, in  a  community  in  which  land  is  generally  exempted 
from  the  freedom  of  exchange,  and  how  deeply  it  pene- 
trates. We  need  not  look  far  into  the  history  of  nations, 
to  assure  ourselves  that  it  is  the  highest  ambition  of  the 
agricultural  laborer  everywhere^  to  own  the  land  which  he 
tills.  To  accomplish  this  he  will  impose  on  himself  un- 
remitting toil,  and  submit  to  a  life  of  the  severest  self- 
denial  and  frugality.  The  ownership  in  fee  simple  of  the 
land  on  which  he  labors  is  his  natural  savings-bank. 
Let  the  possession  of  land  be  subjected,  like  that  of  all 
other  property  to  perfect  freedom  of  exchange,  and  bur- 
dened with  no  exorbitant  expense  for  conveyance ;  and 
the  ever  active  desire  of  the  laborer  for  the  land  he  tills 
will,  through  the  innumerable  incidents  to  which  the  life 
of  every  community  is  subject,  find  its  opportunity.  A 
case  like  that  already  supposed  will  occur.  Or  the 
owner  of  land  will  become  involved  in  debt,  and  his 
lands  will  be  sold  in  payment.  Or  he  will  leave  his 
farm  to  many  heirs,  and  it  will  be  sold  to  facilitate  parti- 
tion. Or  by  some  other  one  of  innumerable  possible  in- 
cidents the  same  thing  will  be  accomplished,  and  nature's 
intentions  will  become  effect.  Ownership  will  pass  to 
him  that  most  desires  and  most  needs  it.  The  tiller  of 
the  soil  will  become  its  lord. 

But  if  the  land  is  owned  in  great  estates  by  a  title 
which  forbids  any  present  owner  to  alienate  it,  the  laborer 


CONDITIONS   OF    FREE    COMPETITION.  249 

has  no  hope.  He  never  can  be  any  thing  but  a  landless 
drudge  The  ownership  of  the  soil  he  tills  is  not  "  war- 
ranted and  defended,"  but  forbidden  "  to  him  and  his 
heirs  forever."  He  and  his  fellow  laborers  sink  more 
and  more  deeply  into  the  condition  of  a  degraded  class 
of  "  hewers  of  wood  and  drawers  of  water  "  for  the  favored 
proprietors  of  the  soil  of  their  common  country.  A  here- 
ditary class  have  a  monopoly  or  rather  the  exclusive 
possession  in  perpetuity  of  the  only  property  which  can 
be  of  any  real  importance  to  the  agricultural  laborer.  A 
class  of  men,  who  with  their  ancestors  who  have  gone 
before  them,  have  given  to  the  lands  oi  the  country  all 
the  real  value  which  they  possess,  not  only  do  not  own 
those  lands,  but  are  virtually  by  law  forbidden  to  own 
them.  They  spend  their  lives  in  a  long  succesr.ion  of 
generations  without  the  stimulus  of  hope.  They  may 
save,  but  they  have  little  inducement  to  do  so,  for  the 
savings  bank  is  their  only  place  of  deposit,  and  the  in 
terest  it  pays  is  so  small  that  it  makes  scarcely  an  ap- 
preciable addition  to  their  income.  They  have  no  inter- 
est in  trying  to  make  their  labor  more  efficient,  for  they 
will  themselves  derive  no  advantage  from  its  increased 
efficiency.  The  buoyant  forces  are  all  taken  out  of 
their  lives.  It  is  sorrowful  to  read  the  philanthropic 
words  of  enlightened  and  humane  Englishmen,  deploring 
the  condition  of  the  English  agricultural  laborer,  and  in 
real  earnestness  inquiring  what  can  be  done  for  him. 
Should  these  words  ever  meet  the  eye  of  such  men  as 
Mr.  Fawcett  and  Mr.  Joseph  Kay,  they  may  perhaps 
attach  little  importance  to  opinions  coming  from  the  far 
off  interior  of  North  America.  But  for  all  that  we  know 
whereof  we  affirm,  and  must  speak  that  we  do  know. 
Nothing  can  they  do  for  this  wretched  class  of  their 
countrymen,  and  we  claim  the  privilege  of  saying,  our 
countrymen  too, — nothing  effectual,  till  they  can  pro* 
II* 


250  ECONOMICS. 

cure  the  abolition  of  this  hateful  land  monopoly,  and  thus 
give  to  every  Englishman  that  fair  chance  which  nature 
intended  for  him  of  owning  that  which  he  more  desires 
and  more  needs  than  any  one  else. 

§  183.  There  has  been  and  there  still  will  be  much 
effort  to  set  all  this  aside,  by  proving  that  after  all  largd 
farming  is  more  profitable  than  small  farming.  Doubt- 
less it  can  be  easily  proved,  that  the  owner  of  a  large 
farm  enjoys  some  advantages  over  the  small  farmer.  It 
is  easier  for  him  to  avail  himself  of  those  agricultural 
machines  which  require  a  pretty  large  outlay  of  capital. 
But  //  cannot  be  shown  that  small  farmers  cannot  combifte 
together  to  secure  those  advantages,  just  so  far  as  they 
are  found  really  to  reduce  the  cost  of  perfect  cultivation. 
American  experience  shows  that  they  can  and  will  do 
any  thing  of  the  sort  which  their  interest  requires.  Great 
landed  proprietors  need  give  themselves  no  philanthropic 
solicitude,  lest  the  land  should  not  be  well  cultivated  if 
it  should  pass  out  of  their  hands.  It  has  already  been 
noticed,  that  agricultural  machinery  is  not  to  any  very 
great  extent  and  probably  never  can  be  labor-saving. 
It  is  also  far  more  important  to  the  economy  of  a  large 
farm  than  it  can  be  to  that  of  a  small  one.  However 
that  may  be,  no  advantages  which  any  intelligent  man 
can  expect  from  the  use  of  agricultural  machinery  can 
make  any  compensation  at  all  for  degrading  millions  who 
should  be  self-active,  self-impelling,  self-superintending 
men,  into  mere  machines,  to  be  impelled  and  guided  by 
the  will  and  intelligence  of  an  overseer.  They  say  one 
overseer  can  superintend  a  hundred  laborers  as  easily 
as  fifty.  But  each  one  of  those  fifty  or  one  hundred 
laborers  will  accomplish  more  as  his  own  overseer,  tilling 
his  own  land,  and  will  produce  better  results  than  any 
overseer  can  obtain  from  him  when  reduced  to  the  posi- 
tion of  a  mere  working  machine.     Such  is  the  precise 


CONDITIONS    OF    FREE   COMPETITION.  2$  I 

difference  between  the  agricultural  laborer  that  nevei 
treads  a  foot  of  his  own  soil,  or  knows  the  luxury  of  sleep* 
'ng  under  his  own  roof,  and  the  man  that  owns  the  soil 
he  tills,  lies  down  at  night  in  his  own  cot,  and  superin- 
tends and  urges  on  his  own  labor. 

§  184.  It  may  perhaps  be  urged  as  an  objection  to 
this  view  of  the  subject,  f/iaf  English  tillage  under  their 
system  of  large  proprietorship  is  more  thorough  and  com- 
plete than  American  tillage  under  our  free  system.  No 
American  who  has  had  the  opportunity  of  making  the 
comparison  will  deny  this  assertion.  English  tillage  is 
more  thorough  and  perfect,  but  it  does  not  hence  follow 
that,  in  our  circumstances,  it  would  be  better.  The 
English  farmer  and  the  American  farmer  are  employed 
upon  problems  of  quite  different  conditions.  The  prob- 
lem of  the  English  farmer  is,  to  obtain  the  greatest  profit 
from  land  of  very  dear  rent,  with  very  cheap  labor.  The 
American  problem  is,  to  obtain  the  greatest  profit  from 
land  of  very  cheap  rent,  with  very  dear  labor.  Any  sen- 
sible man  would  employ  more  labor  at  fifty  cents  a  day 
on  land  whose  rent  was  twenty  dollars  a  year,  or  even 
twenty-five  dollars,  than  he  would  if  his  labor  cost  a  dol- 
lar a  day  and  his  rent  only  five  dollars  a  year.  Precisely 
this  difference  exists  in  the  two  cases,  and  fully  accounts 
for  the  different  degrees  of  thoroughness  of  the  cultiva- 
tion. The  perfection  of  English  tillage  does  not  result 
from  the  tenure  of  the  land,  but  from  very  high  rents  and 
very  cheap  labor.  Any  English  traveler  in  the  United 
States  may  easily  satisfy  himself,  that  in  all  instances  in 
which  the  price  of  our  lands  approximates  the  English 
standard,  the  thoroughness  of  our  tillage  improves  in 
much  the  same  ratio. 

We  must  not  lose  sight  of  another  fact,  which  shows 
conclusively,  that  on  the  whole  large  farming  under  a 
great  permanent  proprietorship,  is  not  more  profitable 


252  ECONOMICS. 

than  the  small  farming  of  freehold  estates  cultivated  by 
the  owner.  Any  man  that  owns  a  large  farm  can,  pro- 
vided no  unnecessary  difficulty  or  expensiveness  obstructs 
the  transfer,  sell  it  in  small  parcels^  each  suited  to  the  wants 
of  a  small  proprietor^  who  is  to  till  it  with  his  own  lahor^ 
for  much  more  than  it  can  be  worth  under  Ofie  management^ 
and  the  tillage  of  hired  laborers ;  and  the  small  proprie- 
tors who  may  buy  it  at  these  high  rates  will  be  far  more 
prosperous,  and  live  in  a  far  higher  style  of  comfort,  than 
the  laborers  that  tilled  it  under  the  single  management 
and  ownership. 

§  185.  We  are  liable  to  be  asked  why,  if  this  is  so, 
English  lands  are  continually  being  aggregated  into  large 
farms^  and  the  holdings  rapidly  becoming  less  numer- 
ous. The  answer  is  obvious.  English  law  from  the  time 
of  the  Conquest,  backed  up  by  English  custom  founded 
on  the  law,  and  if  possible  more  imperative  than  the  law 
itself,  attaches  an  unnatural  dignity,  personal  importance 
and  social  position  to  the  owner  of  land.  These  advan- 
tages excite  in  every  man  of  wealth  an  artificial  eager- 
ness to  be  a  landholder,  and  make  him  willing  to  pay 
more  for  it  than,  considered  merely  as  a  source  of  in- 
come, it  is  worth.  Primogeniture  greatly  increases  and 
intensifies  this  passion  for  land.  The  law  sustains  primo- 
geniture by  giving  the  landed  estate  of  all  intestates  to 
the  oldest  son.  Custom  follows  out  the  same  idea,  and 
extends  it  where  the  law  does  not  carry  it.  To  will  one's 
landed  estate  to  his  oldest  son  comes  to  seem  right,  it  is 
custom,  it  is  respectable,  it  is  English ;  to  divide  it 
equally  among  his  children  smacks  of  agrarianism,  it  is 
an  approach  toward — something  not  quite  English.  Law 
and  custom  combine  to  aggregate  landed  property  into 
the  smallest  number  of  holdings,  and  to  throw  the  labor 
of  tillage  as  far  as  possible  upon  laborers  to  whom  the 
ownership   of  land   has   become  impossible.      All   the 


CONDITIONS   OF   FREE   COMPETITION.  253 

attractions  of  rank,  so  powerful  to  English  minds,  attach 
themselves  to  land,  and  raise  its  price  far  above  its  worth 
as  a  source  of  income.  There  can  be  no  equal  compe- 
tition between  the  land  owner  and  the  laborer  in  circum- 
stances such  as  these.  The  laborer  has  been  degraded 
by  being  subjected  to  these  unfavorable  influences  for 
successive  generations,  and  can  conceive  of  nothing  as 
possible  to  him  but  the  hard  lot  in  which  he  lives.  He 
has  no  home  of  his  own  to  be  rendered  tidy  and  neat  and 
beautiful  by  female  care  and  taste ;  his  wife  and  daugh- 
ters and  sisters  having  no  home  function,  often  sustain 
at  his  side  the  labor  of  the  field,  and  swell  the  super- 
abundant supply  of  labor  which  keeps  down  its  wages  to 
the  very  verge  of  starvation.  This  sad  picture  might  be 
verified  in  every  particular,  by  citing  English  authorities 
of  the  very  highest  respectability.  If  English  philan- 
thropy will  do  anything  for  the  agricultural  laborer  with 
permanent  effect,  she  must  direct  her  efforts  to  the  total 
and  perpetual  abolition  of  her  land  monopoly. 

If  we  are  told  that  we  Americans  know  little  of  the 
difficulty  of  accomplishing  so  fundamental  a  revolution^  both 
in  the  political  and  social  life  of  England,  we  reply  that 
is  very  probable.  Yet  we  do  know  enough  of  the  serious 
difficulties  of  the  case,  to  discern  very  clearly  why  Eng- 
lish philanthropists,  statesmen  and  Christians  are  very 
averse  to  looking  this  question  full  in  the  face  in  all  its 
painful  aspects.  We  once  had  a  question  involving  still 
more  alarming  difficulties.  We  were  compelled  to  meet 
it.  With  nearly  three  hundred  years  of  experience  of 
the  beneficent  workings  of  free  trade  in  land,  we  are 
competent  judges  of  the  necessity  of  abolishing  a  land 
monopoly,  however  difficult  it  may  be.  We  are  willing 
to  hear  lectures  from  the  other  side  of  the  Atlantic,  on 
the  monopoly  of  protection ;  we  need  them,  some  of  us 
are  grateful  for  them.     Many  of  us  are  grateful  for  the 


254  ECONOMICS. 

support  and  encouragement  we  received  from  English- 
men in  our  conflict  with  slaver3\  But  we  are  soundly 
qualified  to  give  lectures  on  land  monopoly.  Of  these 
two  monopolies,  both  of  them  sadly  out  of  place  in  the 
last  quarter  of  the  nineteenth  century,  the  land  monopoly 
is  beyond  comparison  the  more  fundamental,  and  the 
more  subversive  of  all  sound  economic  principles. 

§  i86.  A  second  underlying  condition  of  free  com- 
petition stated  in  the  first  section  of  this  chapter  is — such 
a  deg7'ee  of  intelligence  in  both  parties  to  any  transaction^  as 
will  place  them  on  a  footing  of  substantial  equality. 

Every  transaction  of  exchange  which  is  conducted  by 
competition  assumes  such  equality.  No  honorable  man 
will  negotiate  an  exchange  with  another  party,  knowing 
that  he  is  ignorant  of  the  value  of  his  own  property,  and 
of  that  which  is  offered  him  in  exchange,  or  if  he  does 
exchange  with  him,  it  will  not  be  on  the  principle  of  com- 
petition. He  will  take  upon  himself  the  entire  responsi- 
bility of  making  sure  that  the  ignorant  man  suffers  no 
loss  in  the  transaction.  A  farmer  cannot  enter  into  com- 
petition with  his  domestic  animals.  According  to  his 
own  knowledge  he  must  give  them  what  they  need,  and 
they  can  only  have  what  he  gives. 

On  precisely  the  same  principle,  individual  men  and 
classes  of  men  may  be  so  far  degraded  below  the  ordi- 
nary standard  of  intelligence,  as  to  be  disqualified  to  trans- 
act many  of  the  comfnon  affairs  of  life  by  competition.  There 
are  classes  of  laborers  who  are  in  this  very  condition  in 
respect  to  all  contracts  for  wages.  They  might  perhaps 
obtain  higher  wages  from  other  employers  than  they  are 
receiving.  But  they  do  not  know  it,  and  have  too  little 
mental  activity  to  raise  the  question.  It  may  be  that 
higher  wages  are  paid  for  such  labor  as  they  are  accus- 
tomed to  perform  in  other  districts  not  far  away,  and  to 
them  not  difficult  of  access.     But  they  do  not  know  it; 


CONDITIONS    OF    FREE    COMPETITION.  255 

and  are  too  spiritless  to  raise  the  inquiry.  We  are  told 
the  difference  between  the  wages  of  agricultural  laborers 
in  the  counties  of  Wiltshire  and  Yorkshire,  England,  is 
five  shillings  a  week,  or  considerably  more  than  one-fifth 
of  the  entire  wages  which  the  Wiltshire  laborer  receives. 
Why  does  not  competition  equalize  the  wages  paid  in 
these  two  counties  ?  For  the  most  part  the  answer  is 
the  ignorance  and  stupidity  of  the  Wiltshire  laborer. 
The  laborer  might  emigrate  to  some  other  country  of 
cheap  land,  abundant  food  and  high  wages,  lands  too  of 
liberty  and  security  of  life  and  property.  But  such  la- 
borers know  not  that  there  are  any  such  lands,  or  that 
emigration  is  to  them  possible.  In  short  it  is  a  thing  of 
most  frequent  occurrence,  that  in  highly  civilized  coun- 
tries large  classes  of  men  settle  down  into  such  condi- 
tions of  ignorance  and  semi-brutality,  that  competition 
can  do  nothing  for  them.  The  pretense  of  competition 
is  a  mere  sham,  and  will  result  only  in  stripping  the  ig- 
norant man  of  his  all,  to  enrich  his  sagacious  and  quick- 
witted competitor.  While  these  classes  continue  in  this 
degraded  condition,  our  science  can  do  nothing  for  them. 
It  cannot  reach  them.  It  may  point  out  as  we  are  try- 
ing to  do  the  causes  of  their  unfortunate  condition,  and 
put  in  a  plea  for  the  removal  of  them. 

§  187.  //  is  for  this  reaso?i  only  that  public  provision 
for  education  claims  the  attention  of  the  economist.  We  re- 
joice to  say  that  there  is  in  this  country  almost  a  una- 
nimity of  opinion,  that  the  government  ought  to  provide 
against  the  existence  of  any  such  degraded  and  ignorant 
classes  in  the  bosom  of  society.  The  only  point  of  differ- 
ence which  exists  among  us  in  respect  to  this  matter  re- 
lates to  the  manner  in  which  provision  shall  be  made  for 
the  supply  of  this  want.  There  are  those  who  think  that 
the  sovereignty  over  society  should  be  divided,  that  one 
portion  of  it  should  be  committed  to  the  secular  or  civil 


256  ECONOMICS. 

power,  and  another  very  important  portion  of  it  to  a 
spiritual  power  called  the  church,  and  that  the  education 
of  the  people  should  never  be  undertaken  by  the  former, 
but  entrusted  entirely  to  the  latter.  The  civil  power 
may  raise  money  by  taxation  for  the  support  of  schools, 
but  it  must  entrust  the  management  of  them  entirely  to 
the  ghostly  power  of  the  church.  It  would  be  a  novel 
arrangement  indeed,  that  the  civil  power  expressing  the 
common  voice  of  a  free  people  should  annually  raise 
many  millions  of  money  to  be  entrusted  to  the  manage- 
ment of  a  distinct  sovereignty,  sustaining  no  responsi- 
bility to  the  people  that  contribute  it,  and  perhaps  owing 
allegiance  to  a  foreign  prince.  But  we  have  nothing  to 
say  in  this  place  of  this  matter.  It  belongs  to  morals 
and  not  to  economics. 

Neither  shall  we  attempt  to  define  with  any  accuracy 
the  limits  of  that  system  of  educatiofi  which  should  be  pro- 
vided for  all  the  people  at  the  expense  of  the  state. 
Public  education  comes  within  the  sphere  of  economics 
only  from  the  necessity  of  qualifying  all  the  people  for 
entering  into  that  competition,  which  we  have  seen  is  the 
controlling  force  throughout  the  economic  world.  It  is 
obvious  that  a  system  of  public  instruction  must,  in  order 
to  accomplish  that  end,  afford  to  every  citizen  the  means 
of  acquiring  a  sound  acquaintance  with  our  noble  mother 
tongue  as  spoken,  written  and  printed,  and  thus  come 
into  communication  through  common  and  public  dis- 
course, personal  correspondence  and  periodicals  and 
books,  with  the  existing  actual  world,  and  with  the  civil- 
ization of  our  own  age  and  of  all  ages.  He  should  also 
be  supplied  with  a  knowledge  of  numbers,  as  requisite 
for  all  the  ordinary  purposes  of  computation  and  accounts. 
The  great  outline  facts  of  geography,  history  and  science 
will  be  everywhere  open  to  the  easy  acquisition  of  any 
one  who  possesses  such  a  knowledge  of  a  civilized  mother 


CONDITIONS   OF    FREE   COMPETITION.  257 

tongue,  and  of  the  science  of  numbers.  We  do  not  affirm 
that  the  state  ought  not  to  provide  for  all  the  people  a 
much  more  extensive  education  than  this.  But  we  do 
say  on  the  one  hand,  that  no  one  can  be  fairly  qualified 
to  meet  the  competitions  of  life  without  having  received 
an  education  substantially  fulfilling  these  conditions.  On 
the  other  hand  we  affirm  that  such  an  education  does 
place  the  man  who  has  enjoyed  it  in  vital  communica- 
tion with  the  thought  of  the  world,  and  qualify  him  to 
take  his  place  as  a  civilized  man  and  citizen,  and  if  it 
can  be  shown  that  the  state  ought  to  furnish  to  every 
citizen  at  the  expense  of  the  taxpayer,  an  education  more 
extensive  than  this,  the  proof  of  that  obligation  must 
surely  be  found  elsewhere  than  in  the  economic  relations 
of  the  question.  There  is  no  pretense  that  persons  thus 
educated  are  not  well-fitted  so  far  as  schools  can  do  any- 
thing for  them,  to  meet  all  the  competitions  of  trade  and 
industry. 

§  188.  Philanthropists  to  whom  public  education  is 
a  comparative  novelty,  are  in  danger  of  placing  too  inuch 
dependence  on  it  alone,  as  a  means  of  elevating  depressed 
and  degraded  classes.  You  cannot  educate  a  people 
without  the  stimulus  of  hope.  The  reason  why  popular 
instruction  has  always  been  so  powerful  in  this  country 
is  to  be  sought  in  the  fact,  that  hopefulness  .is  the  most 
powerful  element  in  the  life  of  our  people.  The  very 
child  at  school  sees  that  all  the  prizes  of  life  are  free  to 
his  competition,  and  that  all  the  paths  of  prosperity  are 
open  before  him.  Remove  from  American  society  that 
element  of  hopefulness,  and  our  system  of  popular  edu- 
cation would  cease  to  yield  its  beneficent  fruits.  It 
would  languish  and  die.  We  do  not  believe  "National 
Education  "  can  do  much  for  the  English  agricultural 
laborer,  till  the  possibility  of  becoming  the  proprietor 
of  the  soil  is  given  him.     You  cannot  make  him  aspire 


258  ECONOMICS. 

to  become  an  educated  drudge.  For  his  elevation  oui 
observation  would  lead  us  to  repose  far  more  confidence 
in  free  trade  in  land  without  public  education,  than  in 
public  education  without  free  trade  in  land.  A  people 
with  the  avenues  to  every  species  of  prosperity  open  be- 
fore them  are  far  more  likely  to  educate  their  children 
without  the  aid  of  the  state,  than  a  class  of  persons 
against  whom  the  avenues  to  a  prosperous  life  are  ob- 
structed, are  to  receive  an  education  when  gratuitously 
tendered  them.  The  experience  of  this  country  every- 
where teaches  the  efficiency  of  self-help  rather  than  of 
government  help. 

§  189.  The  history  of  our  country  furnishes  one  ex- 
ample of  the  combined  influence  of  free  trade  in  land 
and  a  system  of  public  education  substantially  such  as 
that  defined  above,  in  qualifying  a  farming  community 
for  the  vicissitudes  of  life,  which  deserves  to  be  recorded. 
We  refer  to  the  history  of  the  farming  population  of  New 
England.  Free  trade  in  land  existed  there  from  the 
origin  of  the  Colonies,  and  it  has  always  been  the  glory  of 
New  England,  that  through  her  system  of  public  schools 
every  child  was  taught  to  read  and  write  his  mother 
tongue.  The  consequence  is  that  New  England  never 
contained  a  degraded  and  wretched  class,  unless  brought 
there  by  foreign  emigration,  and  that  a  greater  propor- 
tion of  her  sons  have  not  only  received  the  education  of 
her  common  schools,  but  have  been  liberally  educated 
at  her  colleges  for  professional  and  public  life,  and  have 
become  men  of  national  and  some  of  them  of  Europeap 
reputation,  than  in  any  other  community  on  the  globe. 
This  has  been  true  not  only  of  the  sons  of  her  wealthy 
families,  but  of  the  hard-handed  farmers,  that  have  forced 
a  subsistence  out  of  her  rugged  and  unfriendly  hill  sides. 

Nor  is  this  all.  The  soil  of  these  states  is  for  the 
most  part  barren  and  its  cultivation  very  laborious.     Its 


CONDITIONS    OF    FREE   COMPETITION.  259 

winters  are  long  and  very  severe,  increasing  the  cost  of 
living,  and  rendering  the  rearing  of  domestic  animals 
very  expensive.  Early  in  the  present  century  the  farm- 
ers of  these  states  began  seriously  to  feel  the  competi- 
tion of  products  procured  from  much  better  lands. 
Within  the  last  fifty  years,  the  products  of  the  great 
interior  of  the  country  have  found  their  way  to  the  mar- 
kets of  the  Atlantic  coast  by  great  lines  of  easy  com- 
munication, and  by  their  ruinous  competition  have  driven 
most  of  the  products  of  the  New  England  farmer  quite 
out  of  the  market.  Lands  in  New  England  have  declined 
in  price  in  many  cases  to  one-half  and  in  some  cases  to 
one-third  the  rates  at  which  they  were  sold  at  the  begin- 
ning of  the  century.  In  most  cases  in  the  history  of  the 
world,  the  falling  of  such  disaster  upon  a  numerous  farm- 
ing population  has  produced  great  distress  and  pinching 
poverty.  The  New  England  farmer  has  had  the  intelli- 
gence and  energy  to  pass  throngh  the  trial  without  any 
such  experience.  Some  have  remained  at  the  home- 
steads of  their  fathers,  and  bought  the  lands  of  their 
neighbors  at  the  reduced  prices  at  which  they  were 
offered,  and  found  the  means  of  making  a  good  living 
from  the  few  products  which  could  still  be  reared  with 
profit.  Others  have  disposed  of  their  farms,  and  ac- 
cumulated wealth  by  making  the  mountain  torrents  that 
rush  down  their  valleys  drive  machinery  of  almost  every 
variety.  Others  still  went  to  the  cities,  engaged  in  com- 
merce and  often  found  their  places  among  the  merchant 
princes  of  the  land.  By  far  the  greater  number  however 
traced  back  the  lines  along  which  that  superabundance 
of  agricultural  products  came  that  ruined  their  New 
England  farming,  made  new  homes  amid  the  boundless 
fertility  of  the  Great  Valley,  and  became  wealthy  land- 
owners. Give  a  farming  population  freedom  of  exchange 
and  migration,  and  the  self-reliance  which  is  nurtured  by 


26o  ECONOMICS. 

high  intelligence,  and  they  will  be  equal  to  any  emer- 
gency. The  history  of  New  England  farming  is  worthy 
of  the  study  of  the  economist. 

§  190.  We  mentioned  at  the  beginning  cf  th}s  chapter 
a  third  underlying  condition  of  equal  competition—  mora/ 
integrity.  We  do  not  propose  dwelling  on  this  topic. 
It  is  necessary  to  do  little  more  than  to  name  it.  Com- 
petition in  the  economic  sense  assumes  the  truthfulness  of 
both  parties  to  the  transaction^  that  each  party  is  offering 
for  exchange  that  which  he  professes  to  offer,  and  not 
something  else.  Whenever  this  ceases  to  be  the  fact 
competition  between  the  parties  ceases,  and  the  struggle 
between  them  is  no  longer  an  effort  of  each  to  obtain  the 
true  value  of  his  commodity,  but  a  succession  of  cunning 
tricks  to  outwit  each  other.  Prosperity  means  success- 
ful villainy,  failure  unsuccessful  effort  to  defraud  another. 
If  any  honest  men  come  to  such  a  market  they  are  but 
too  likely  to  fall  victims  to  the  arts  of  deception  that  are 
practiced  all  around  them.  Let  no  one  imagine  that 
such  a  scramble  of  knaves,  each  endeavoring  to  appro- 
priate to  himself  the  greatest  possible  amount  of  dis- 
honest gains,  bears  any  resemblance  to  that  competition 
which  is  the  pervading  law  of  our  science,  of  which  truth 
is  ever  the  fundamental  element.  The  transaction  of  a 
people's  business  in  the  manner  just  characterized  is  the 
sure  symptom  of  social  decay  and  rottenness.  The 
struggles  of  unprincipled  men  in  the  gold  market,  the 
stock  market  and  the  grain  market  to  outdo  other  men 
in  the  arts  of  deception,  sustain  the  same  relation  to 
honorable  competition,  that  the  ostentatious  prayers  of 
the  hypocrite  do  to  the  genuine  devotions  of  righteous 
God-fearing  men. 


POPULATION.  261 


CHAPTER  XI. 


Population. 

§  191.  It  has  been  made  evident  in  our  previous  dis- 
cussions that  population  is  an  indispensable  element  of 
our  science.  We  have  seen  how  it  is  related  to  wages, 
to  rent,  and  to  the  cost  of  living.  It  is  necessary  there- 
fore next  to  inquire  into  the  economic  laws  by  which  the 
movements  of  population  are  controlled.  Toward  the 
dose  of  the  eighteenth  century,  the  celebrated  Mr. 
Malthus  published  his  theory  of  population,  which  has 
since  exerted  a  prodigious  influence  on  the  economic 
writers  and  thinkers  of  the  English  school.  It  was 
originally  in  the  mind  of  Mr.  Malthus  a  powerful  reaction 
against  the  day-dreams  of  the  enthusiast  Godwin,  about 
the  perfectibility  of  human  nature.  But  its  influence  on 
the  speculations  of  economists  since  its  publication  have 
been  perhaps  scarcely  less  injurious,  than  the  prevalence 
of  the  theories  he  opposed  would  have  been.  As  Professor 
Bowen  very  justly  remarks,  "the  whole  subject  of  Politi- 
cal Economy  is  colored  with  it,"  and  we  will  add  that 
coloring  is  a  deep  tinge  of  melancholy,  which  has  ren- 
dered the  whole  subject  repulsive  to  all  minds  of  a  cheer- 
ful and  hopeful  turn.  It  is  our  intention  in  this  chapter 
to  show  that  a  true  view  of  the  subject  gives  no  coun- 
tenance to  any  such  sombre  and  melancholy  conclusions. 

The  fundame?ital  principle  of  Mr.  Malthus*  theory  is^ 
that  the  natural  fecundity  of  the  human  race  is  such,  that 
the  population  in  all  countries  constantly  tends  to  outrun 
the  means  of  subsistence^  and  therefore  to  keep  the  lower 
stratum  of  population  always  on  the  verge  of  starvation. 
Enghsh  economists  especially  have  accepted  this  dor- 


262  ECONOMICS. 

trine  without  due  consideration  of  the  checks  and  modi- 
fications to  which  natural  law  subjects  it,  and  have  laid 
it  so  much  to  heart,  that  they  often  seem  to  regard  it  as 
the  foremost  duty  of  the  economist,  to  point  out  methods 
of  preventing  the  too  rapid  increase  of  the  laboring  classes. 
Scarcely  any  theme  is  dwelt  on  with  more  copiousness 
and  eloquence,  than  the  imprudent  marriages  of  the  la- 
boring poor  ;  and  we  will  add,  that  it  seems  to  us,  that  on 
no  subject  have  more  eloquent  words  been  wasted.  The 
increase  of  population  in  a  given  country  or  in  a  given 
class  depends  on  natural  laws  which  will  have  their 
course,  with  very  little  respect  to  the  eloquent  words  of 
economists. 

§  192.  We  have  already  shown,  that  in  the  long  course 
of  human  events,  the  fundamental  principle  enunciated 
by  Mr.  Malthus  would  prove  true,  provided  the  whole 
world  can  be  brought  into  such  a  condition  of  peace, 
prosperity  and  civilization  as  to  permit  both  capital  and 
population  to  increase  according  to  their  own  laws,  till 
all  the  resources  of  our  planet  are  developed  to  the  ut- 
most, that  is  till  the  entire  food-producing  power  of  the 
whole  earth  has  been  brought  into  active  use  and  devel- 
opment. But  we  purpose  to  show  that  in  the  long  inter- 
val which  must  intervene  before  the  human  family  can 
make  any  sensible  approach  towards  such  a  consumma- 
tion, the  doctri?ies  of  Mr.  Malthus  are  to  all  practical  pur- 
poses worthy  of  no  consideration^  and  that  even  at  that 
distant  day  when  if  ever  there  shall  be  an  approximation 
to  'that  completed  order  of  things,  there  are  ample  pjv- 
visions  in  the  very  nature  of  the  case  against  the  sombre 
conclusions  to  which  the  followers  of  Mr.  Malthus  would 
conduct  us.  The  safety  of  the  human  race  in  all  the 
changes  through  which  it  is  to  pass  in  the  progressive 
development  of  civilization  is  to  be  sought  where,  in  the 
progress  of  this  treatise,  we  have  so  often  found  it,  in  the 


POPULATION.  263 

full  application  of  the  law  of  competition.  The  opera- 
tion of  that  law  will  afford  the  assurance  we  need  through 
two  consequences  which  will  flow  from  it. 

/.  //  will  disseminate  by  a  regular  and  necessary  pro- 
cess civilized  communities  over  the  whole  earth,  or  at  least 
where  there  are  natural  resources  to  sustain  them. 

II.  Faithfully  applied  this  law  will  always  derive  each 
succeeding  generation  from  the  sou?idest  and  healthiest  pari, 
of  the  generation  that  precedes  it. 

§  193.  We  are  first  to  consider  the  influence  of  com- 
petition in  securing  the  gradual  dissemination  of  civilized 
communities  wherever  they  can  find  sustenance.  This, 
like  many  other  laws  of  our  science,  has  only  within  very 
recent  times  sufficiently  emerged  from  the  confusion  of 
the  long  conflict  which  has  existed  between  civilization 
and  barbarism  to  be  capable  of  being  distinctly  discerned. 
But  for  the  last  two  centuries  it  has  been  becoming 
more  and  more  apparent,  and  can  now  be  established  a.s 
a  permanent  law  of  human  progress.  It  takes  effect  both 
upon  labor  and  capital.  We  must  first  consider  its  rela- 
tions to  labor.  If  the  laborer  is  only  a  barbarian,  hew- 
ing wood  and  drawing  water  for  a  civih'zed  employer,  he 
will  be  too  ignorant  to  know  that  there  is  any  place  to 
which  he  can  emigrate  and  find  a  better  lot,  and  too 
stupid  to  make  the  effort.  Such  classes  of  laborers  are 
almost  as  immovable  as  though  they  grew  to  the  soil. 
But  if  the  laborer  has  the  intelligence  and  energy  and 
self-reliance  of  a  developed  manhood,  whenever  the  con- 
ditions of  his  life  become  hard,  the  government  of  his 
country  oppressive,  or  the  wages  of  his  labor  inadequate 
to  the  support  of  his  family,  he  will  seek  a  new  home  in 
some  region  of  virgin  fertility  of  soil  and  abundant  un- 
appropriated resources.  And  he  will  carry  civilization 
with  him.  He  cannot  do  otherwise.  It  is  inwrought 
into-the  very  texture  of  his  soul.     Wherever  he  makes 


264  ECONOMICS. 

his  home,  the  institutions  of  civilization  and  freedom  wil, 
spring  up  spontaneously.  From  the  emigration  of  such 
a  people  civilized  communities  are  as  sure  to  spring  up 
in  any  wilds  where  they  make  their  home,  as  the  fruits 
of  the  earth  are  to  spring  from  the  seeds  which  they  sow. 
Such  communities  can  not  spring  from  any  migrations 
of  laborers  who  are  not  themselves  civilized  men,  and 
consequently  no  nation  can  become  the  parent  of  such 
young  offshoots  of  civilization,  whose  laborers  are  de- 
graded and  uncultivated. 

Perhaps  the  first  manifestation  of  this  law  occurred 
ill  the  English  colonization  of  North  America.  The  mag- 
nificent results  which  have  come  from  the  settlements  on 
the  eastern  coast  of  our  country  by  emigrants  from  Eng- 
land, as  compared  with  all  else  that  has  been  achieved 
by  the  European  colonization  of  the  fifteenth,  sixteenth 
and  seventeenth  centuries,  can  be  explained  only  by  the 
peculiar  character  of  the  population  that  planted  those 
colonies.  They  were  composed  of  farmers,  artisans, 
merchants  and  scholars  from  the  middle  classes  in  Eng- 
lish society,  and  bore  with  them  to  the  new  world  the 
best  elements  of  the  civilization  of  the  mother  country, 
and  transplanted  them  to  their  new  homes,  and  the  emi- 
nent success  of  England  in  planting  colonies  in  all  parts 
of  the  world  is  due  to  the  fact,  that  she  sends  out  emi- 
grants that  unite  labor  with  culture.  No  nation  can 
plant  civilized  colonies  in  the  wilds  of  the  earth,  unless 
she  has  within  her  own  bosom  a  working  population 
which  is  imbued  with  her  civilization.  It  is  a  great 
blessing  to  the  world,  that  in  the  seventeenth  century 
England  had  no  Mr.  Malthus  to  advise  her  to  bring  her 
birth-rite  and  death-rate  as  near  to  equality  as  possible, 
and  that  when  he  did  appear,  she  was  too  wise  to  follow 
his  advice,  and  that  of  the  men  of  his  school.      Her 


POPULATION.  265 

population  is  still  increasing  at  home,  and  widely  diffus- 
ing her  civilization  in  both  hemispheres. 

§  194.  We  have  said  that  this  law  of  diffusion  zvas  not 
apparent  in  the  ancient  world,  or  until  comparatively  recent 
times.  Several  of  the  civilized  nations  of  antiquity  sent 
out  many  colonies,  but  none  of  them  manifested  much 
power  to  transplant  and  reproduce  their  own  civilization 
in  the  lands  which  they  colonized.  It  was  for  the  want 
of  that  very  element  of  which  we  have  been  speaking, 
laboring  men,  artisans,  tillers  of  the  soil,  who  could 
colonize  and  carry  the  civilization  of  the  parent  state 
with  them.  The  reason  why  the  Egyptians  did  not  fol- 
low the  Nile  to  its  source,  as  the  American  emigrant 
does  the  Mississippi  and  its  branches,  and  plant  their 
civilization  upon  the  fertile  lands  of  Central  Africa,  and 
around  the  magnificent  lakes  which  recent  travelers  have 
made  known  to  the  world,  was  that  her  civilization  was 
confined  to  the  upper  strata  of  society,  and  her  toiling 
laborers  had  no  share  in  it.  They  did  not  know  how  to 
seek  a  better  lot  in  other  lands,  and  escape  the  com- 
petition that  crushed  them  at  home.  They  had  no  cul- 
tivation, and  if  they  emigrated  could  not  carry  it  with 
them. 

There  are  some  of  the  most  cultivated  nations  of  our 
own  times,  that  seem  to  be  in  conditions  in  this  respect 
very  similar  to  theirs.  The  birth-rate  and  the  death-rate 
are  very  nearly  equal,  and  consequently  they  neither 
send  out  colonies  to  transplant  their  civilization,  nor  in- 
crease in  population  at  home.  They  are  as  stationary  as 
the  followers  of  Mr.  Malthus  could  desire.  Such  a 
nation  may  exert  influence  upon  the  world  by  its  litera- 
ture and  science,  its  arts,  its  diplomacy  and  its  arms, 
but  that  higher  prerogative  of  reproducing  itself  under 
other  skies  by  its  colonial  off-shoots  is  denied  it. 

§  195.  The  power  which  a  nation  possesses  of  trans- 
12 


266  ECONOMICS. 

planting  her  civilization  to  unoccupied  or  sparsely  oc* 
cupied  portions  of  the  earth,  depends  far  more  on  the 
quality  than  on  the  quantity  of  her  emigration.  There  are 
at  the  present  time  several  countries  of  Europe  which 
swarm  with  emigrants,  and  yet  the  emigrating  population 
of  these  nations  shows  very  little  power  to  lay  the  first 
foundations  of  civilized  settlements.  Their  places  of 
destination  are  colonies  founded  by  men  of  other  nation- 
alities, and  already  in  a  prosperous  condition.  They 
are  mingled  with  populations  of  strange  language  and 
institutions,  and  in  a  generation  or  two  lose  their  own, 
and  nearly  all  traces  of  their  national  origin  disappear. 
Nations  will  be  successful  in  transplanting  their  civiliza- 
tion, just  in  proportion  as  the  civilizing  forces  have 
reached  those  middle  and  lower  strata  of  society,  in 
which  the  pressure  of  competition  is  most  felt,  and  the 
impulse  to  emigration  strongest.  Even  England  herself 
would  be  far  more  powerful  in  this  way  than  she  is,  if  in 
any  way  her  agricultural  population  could  be  brought  up 
to  the  position  of  intelligent,  cultivated,  self-reliant  men. 
A  far  less  number  of  such  men  could  do  all  the  work  of 
English  agriculture  than  are  now  employed  in  it,  and  do 
it  much  better  than  it  is  done,  and  English  economists, 
instead  of  uttering  fruitless  lamentations  over  the  impru- 
dent marriages  of  their  laboring  population,  would  exult 
in  a  still  wider  extension  of  the  English  language  and 
English  freedom  in  new  regions  of  the  earth  than  ever 
before.  No  doctrine  can  be  more  directly  at  war  with 
the  true  prosperity  of  the  world  under  its  present  condi- 
tions, than  that  of  Mr.  Malthus  and  his  followers.  The 
true  economic  lesson  of  the  nineteenth  century  is  not 
that  of  the  Malthus  school,  but  that  given  to  our  first 
parents,  "  to  he  fruitful  and  multiply  and  replenish  the 
earthy  But  we  must  remove  from  the  generations  that 
are  coming  all  the  oppressions  of  feudal  and  class  legis- 


POPULATION.  267 

lation,  and  open  to  them  all  the  blessings  of  free  thought, 
free  exchange  and  free  locomotion,  and  then  we  shall 
have  no  reason  to  stand  in  fear  of  the  "  natural  fecundity 
of  the  humanj-ace." 

§  196.  Free  competition  will  not  only  disseminate 
civilized  labor  over  the  earth,  but  it  will  equally  tend  to 
send  abroad  the  surplus  capital  of  civilized  nations.  We 
have  seen  that  by  an  invariable  law,  the  interest  and 
profits  of  capital  decline  with  the  growth  of  wealth  and 
civilization  in  any  country.  As  the  rate  of  interest  de- 
clines, capitalists  naturally  become  dissatisfied  with  the 
small  gains  they  receive,  and  look  abroad  for  more  profit- 
able investments.  If  there  are  other  countries  where 
the  risk  is  no  greater  than  at  home,  and  the  demand  for 
capital  so  great  as  to  pay  a  much  higher  rate  of  interest, 
capital  is  as  sure  as  labor  to  yield  to  the  force  of  com« 
petition,  and  go  where  a  higher  rate  of  interest  can  be 
obtained.  Such  opportunities  of  safe  and  profitable  in- 
vestment will  be  sure  to  be  found  in  those  new  settle- 
ments which  civilized  labor  is  building  up.  The  surplus 
capital  of  the  country  will  therefore  follow  the  emigrant 
laborer,  and  render  him  its  powerful  aid  in  founding  and 
rearing  up  new  free  states  and  nations.  As  this  process 
goes  on,  the  safety  of  capital  in  the  remote  lands  of  the 
world  will  be  constantly  growing  more  and  more  assured, 
and  capitalists  will  become  less  and  less  reluctant  to 
trust  their  capital  abroad.  The  consequence  will  be 
that  the  market  for  capital  at  home,  relieved  of  a  surplus, 
will  be  more  buoyant,  and  accumulation  more  rapid. 
Surely  then  it  should  be  the  ambition  of  every  civilized 
nation  to  secure  for  itself  such  a  condition  of  its  social 
and  economic  forces  at  home,  that  it  may  be  able  to  bear 
its  part  in  extending  the  blessings  of  civilization  to  the 
rest  of  the  world. 

§  197.  The  other  consequence  which  will  result  from 


268^  ECONOMICS. 

.he  application  of  competition  to  the  problem  of  popula 
tion  is,  that  //  will  always  derive  each  succeeding  generation 
from  the  soundest  and  healthiest  elemeJits  of  the  generation 
that  preceded  it.  It  is  not  denied  that  the  l^w  of  compe- 
tition honestly  applied  to  society  must  produce  great 
inequalities  of  condition.  It  is  now  necessary  that  we 
should  examine  these  inequalities  analytically,  and  en- 
deavor to  understand  how  they  stand  related  to  human 
well-being  on  the  whole.  Any  observant  man  may  easily 
satisfy  himself  that  any  civilized  society,  under  the  influ- 
ence of  competition,  will  present  four  classes  of  persons. 

1.  A  considerable  number  of  persons  will  be  founds  who 
are  not  able  to  perform  a  suffi,ciefit  amount  of  labor  for  their 
own  support.  The  persons  who  belong  to  this  class  have 
partly  been  reduced  to  it  by  disease,  or  misfortunes 
which  they  had  no  power  to  avoid,  partly  also  by  their 
own  vices,  or  the  vices  of  their  natural  protectors,  and 
partly  they  have  been  born  with  natural  endowments  so 
inferior  that  they  are  incapable  of  self-support. 

2.  Another  class  is  composed  of  those  who,  though 
able  to  labor  for  self-support^  are  not  able  to  support  fami- 
lies. These  persons  also  have  come  into  their  unfortunate 
position  through  the  same  causes  just  enumerated. 

3.  A  third  class  is  composed  of  those,  who  by  a  life 
of  labor  and  frugality  are  able  to  support  a  family  i?i  plenty 
and  substantial  comfort.  In  this  class,  in  the  best  condi- 
tions of  civilized  society,  are  comprehended  the  great 
majority  of  the  people. 

4.  The  fourth  class  is  composed  of  those  who  are 
able  to  command  an  income  that  surpasses  all  that  is  need- 
ful for  the  sustenance  and  substantial  comfort  of  a  family. 
This  class  is  small  in  numbers,  but  controls  a  large  por- 
tion of  the  capital  of  the  community. 

As  civilization  advances,  competition  has  never  failed 
in  any  country  to  develop  these  four  classes ;  and,  in 


POPULATION.  269 

respect  to  the  problem  of  population  the  division  is  one 
of  great  importance. 

§  198.  From  the  nature  of  the  case  the  two  lower 
strata  of  society  as  just  defined  can  contribute  nothiiig  to  the 
capital  of  the  future^  and  little  to  its  population.  If  mar- 
riages occur  in  these  two  classes  and  children  are  born, 
they  will  be  born  to  conditions  of  poverty  and  want,  and 
will  either  perish  in  infancy  or  be  reared  by  charity.  To 
a  great  extent  the  former  will  be  the  fact.  Charity  may 
do  what  it  can  for  them,  but  their  ordinary  conditions 
will  be  so  unfavorable,  that  few  of  them  can  survive  those 
violations  of  the  laws  of  life  and  health  to  which  they 
will  be  exjDOsed.  These  results  will  follow,  not  only  ir 
those  advanced  states  of  society  in  which  population  is 
approximating  its  greatest  possible  density,  but  in  all 
stages  of  society.  The  difficulty  in  these  cases  is  not 
the  scarcity  of  the  necessaries  of  life,  but  the  inability  of 
this  class  of  persons  to  earn  the  support  of  a  family.  It 
is  simply  an  application  of  the  fundamental  law  that  one 
owns  nothing,  except  what  he  produces  by  the  exertion 
of  his  own  powers.  These  classes  of  persons  do  not  own 
the  means  of  supporting  a  family,  because  they  do  not 
produce  them  by  their  labor. 

The  persons  included  in  these  two  lower  strata  will 
not  therefore  be  to  any  considerable  extent  parents  of  the 
coming  generatio7i.  Just  in  proportion  as  society  is  per- 
meated by  intelligence  and  high  moral  principle,  the 
marriages  of  persons  of  these  classes  will  be  few  and 
rare,  because  everywhere  discountenanced  and  disap- 
proved. They  will  for  the  most  part  spend  their  lives 
under  the  protection  and  in  the  families  of  those  who 
belong  to  the  more  prosperous  classes,  and  will  not  suffei 
the  inconveniences  and  privations  of  poverty.  Thus 
competition  fairly  applied  will  clearly  draw  the  line  be- 
tween those  who  should  marry  and  those  who  should 


27©  ECONOMICS. 

not,  and  to  a  great  extent  prevent  the  marriage  of  the 
latter. 

§  199.  The  upper  stratum  or  fourth  class  is,  as  has 
been  remarked,  small,  and  does  not  contribute  to  the 
population  of  the  future  in  proportion  to  its  nujnhers.  For 
various  reasons  the  self-indulgent  spirit  which  is  apt  to 
prevail  in  the  homes  of  the  rich  is  proved  by  experience 
to  be  unfavorable  to  the  rearing  of  children.  The  ranks 
of  population  for  coming  gene?'ations  are  therefore  chiefly 
filled  from  the  third  class.  It  is  also  obvious,  that  for 
the  most  part  in  this  class  only  are  found  the  conditions 
most  favorable  to  a  sound,  healthy  and  vigorous  human- 
ity. In  all  the  other  three  classes  they  are  in  some  de- 
gree wanting.  In  the  higher,  there  is  too  little  of  self- 
denial,  self-control  and  self-government.  Both  physical 
and  mental  energy  are  apt  to  be  impaired  by  the  absence 
of  any  felt  necessity  of  exercising  them.  Humanity  in 
the  homes  of  the  rich  is  too  often  like  a  hot  house  plant, 
sickly  and  delicate,  because  not  inured  to  the  trying 
varieties  of  experience  which  must  be  met  in  the  open 
air  of  ordinary  life.  In  the  two  lower  classes  the  condi- 
tions are  still  more  unfavorable  either  to  physical,  men- 
tal or  moral  soundness  and  health.  But  in  the  third 
class  all  the  conditions  of  a  perfect  manhood  may  be 
more  reasonably  expected  to  exist,  physical  and  mental 
vigor,  a  sound  body  and  an  active  and  instructed  mind. 
If  in  this  class  the  standard  of  domestic  morality  is 
elevated,  marriage  will  be  ithe  altnost  universal  condi- 
tion of  life,  and  large  families  will  be  apt  to  be  reared. 

§  200.  From  the  stand-point  we  have  now  attained,  w& 
can  discover  the  relation  of  the  law  of  co?npetition  to  the 
reproduction  of  the  race.  It  is  simply  and  only  a  great 
natural  provision  for  propagating  the  race  from  its 
soundest  and  most  healthy  specimens.  Every  intelli- 
gent farmer  knows  the  necessity  of  providing  for  this,  in 


POPULATION.  271 

grder  that  his  domestic  animals  instead  of  deteriorating, 
may  improve  in  their  successive  generations.  The  law 
of  competition  secures  the  propagation  of  the  human 
race  in  accordance  with  such  a  provision.  Any  other 
mode  of  distributing  the  products  of  industry  than  that 
which  results  from  competition,  would  defeat  this  benefi- 
cent design,  and  propagate  the  race  indiscriminately 
from  the  best  and  the  poorest  specimens,  or  even  give 
preference  to  the  poorest.  For  example  that  system  of 
involuntary  servitude  which  but  lately  existed  in  this 
country  propagated  the  laboring  population  in  the  por- 
tions of  the  country  where  it  prevailed,  from  a  race  of 
barbarians,  retaining  its  barbarism  in  the  midst  of  us. 
The  master  encouraged  the  breeding  of  his  slaves,  and 
reared  their  offspring  as  a  matter  of  profit,  precisely  as 
in  the  case  of  his  domestic  animals.  For  the  most  part 
slaves  were  the  only  available  laborers.  The  system 
therefore  contained  a  provision  for  raising  up  an  inferior 
humanity,  a  race  of  barbarians,  to  be  depended  on  to  do 
the  work  of  the  country  in  all  the  future.  It  artificially 
and  in  violation  of  nature's  law  provided  for  the  propaga- 
tion and  perpetuity  of  barbarism — a  barbarism  as  devoid 
of  all  the  ornaments  and  beauties  of  life,  of  every  thing 
except  strictly  necessary  food  and  clothing,  as  the  beasts 
of  the  field. 

The  foundation  principle  of  all  free  society  is  every  man's 
ownership  of  himself  resulting  by  an  inevitable  logic,  in 
the  law  of  competition.  The  law  of  competition  gives 
us  the  law  of  wages,  and  draws  the  future  succession  of 
the  race  precisely  from  that  portion  of  the  community 
that  is  most  favorable  to  health  of  body  and  soundness 
of  mind,  and  all  the  noblest  attributes  of  humanity,  and 
thus  places  the  race  on  an  ascending  and  not  on  a  de- 
scending plane  for  all  the  future. 

One  cannot  fail  to  notice  the  agreement  of  the  law  of 


2  72  ECONOMICS. 

population  as  thus  developed  with  that  struggle  for  exist 
ence,  that  survival  of  the  strongest^  which  Mr.  Darwin  taS 
shown  to  be  very  widely  prevalent,  both  in  the  animal 
and  vegetable  kingdoms.  We  have  by  no  means  accepted 
the  extreme  inferences  which  Mr.  Darwin  draws  from  his 
very  acute  and  philosophic  observations.  We  do  not 
think  them  justified  by  his  facts.  But  he  has  shown  that 
the  principle  above  referreid  to  has  great  influence  in 
modifying  a  species  within  itself.  We  are  not  however 
in  the  least  indebted  to  Mr.  Darwin  for  the  application 
of  the  principle  to  the  human  species  in  the  law  of  popu- 
lation above  stated.  In  the  year  1863,  years  before  we 
had  any  knowledge  of  Mr.  Darwin's  observations,  we 
developed  this  law  of  population  in  an  essay  published 
in  the  Continental  Monthly,  then  edited  by  Hon.  Robert 
J.  Walker.  We  have  not  since  seen  any  reason  to  call 
in  question  its  soundness. 

§  201.  We  come  therefore  to  the  conclusion  that  the 
law  of  competition  in  the  distribution  of  the  products  of 
industry,  applied  to  a  people  however  numerous,  and 
spread  over  however  vast  a  portion  of  the  earth,  pro- 
vided that  people  is  thoroughly  pervaded  in  all  its 
classes  with  a  sound  and  true  civilization,  will  secure  its 
propagation  on  an  ever  progressive  course  of  growth  ana 
improvement ;  but  that  if  there  is  an  understratum  which 
is  excluded  from  the  benefits  of  its  civilization,  poor, 
ignorant,  stupid,  vicious,  that  fact  will  entail  upon  it 
hereditary  disease,  which  it  will  be  exceedingly  difficult 
to  eradicate,  when  society  has  reached  its  maturity.  We 
admit  of  course  that  the  time  must  come,  even  on  the 
supposition  that  all  the  social  and  economical  laws  of 
human  well-being  are  strictly  obeyed,  when  the  popula- 
tion of  the  world  will  press  hard  upon  the  means  of  sub* 
sistence  which  can  be  derived  from  its  soil.  But  the  law 
of  competition,  applied  under  its  necessary  and  natural 


CONDITIONS    OF   GENERAL    PEACE.  27^ 

conditions,  affords  the  means  of  meeting  that  exigency 
as  easily  and  with  as  little  inconvenience,  as  it  daily 
regulates  the  supply  of  breadstuffs  or  butcher's  meat  to 
the  population  of  a  great  city.  The  supply  is  so  accu- 
rately adjusted  to  the  demand,  that  on  the  one  side  there 
is  no  lack  and  on  the  other  no  loss  by  excess.  Precisely 
in  the  same  manner,  give  competition  unobstructed 
course,  and  give  it  freedom,  rationality,-  intelligence  and 
moral  integrity  to  act  upon,  and  it  will  adjust  the  popu- 
lation of  the  globe  to  the  full  productive  power  of  the 
planet,  without  giving  any  occasion  of  anxiety  or  perplex- 
ity to  the  economic  philosophers.  There  need  be  no 
fear  of  the  too  rapid  increase  of  the  laboring  classes. 


CHAPTER   Xir. 
Economic  Conditions  of  General  Peace. 

§  202.  It  has  been  made  apparent  in  the  two  pre- 
ceding chapters,  that  it  is  an  important  condition  of  the 
healthful  working  of  the  economic  forces,  that  intelli- 
gence and  all  the  higher  elements  of  civilization  should 
reach  and  permeate  that  portion  of  the  community  that 
is  composed  chiefly  of  laborers  possessing  little  or  no 
capital.  It  was  also  shown  incidentally,  that  the  fulfill- 
ment of  that  condition  is  greatly  facilitated  by  such  an 
extension  of  free,  stable  and  just  government  as  will  en- 
able both  labor  and  capital  to  avail  themselves  of  the 
resources  of  the  whole  world.  Such  an  extension  of 
civilization  over  the  whole  world  is  the  ultimate  result 
toward  which  the  whole  system  tends.  In  order  to  this 
12* 


274  ECONOMICS. 

the  prevalence  of  peace  among  all  civilized  nafiofis  is  0/ 
prime  importance.  It  is  our  intention  in  this  chapter  to 
turn  a  little  aside  perhaps  from  the  direct  line  of  our 
argument,  to  show  that  this  also  is  greatly  dependent  on 
the  extension  of  the  benefits  of  civilization  to  the  labor- 
ing masses.  Nations  will  not  live  in  peace  with  their 
neighbors,  while  they  maintain  within  themselves  such 
misadjustments  of  economic  forces,  as  have  been  all  too 
common  in  the  past  history  of  the  world. 

In  a  former  part  of  this  treatise,  it  was  shown,  that 
there  is  such  a  natural  adjustment  of  man's  power  to 
labor  to  the  supply  of  his  wants,  that  if  the  necessaries 
of  life  only  are  sought  and  enjoyed,  a  large  part  of  his 
power  to  labor  will  find  no  employment,  and  remain  per- 
petually useless.  The  same  results  will  follow  to  a  con- 
siderable degree,  if  the  civilizing  forces  are  applied  only 
to  a  part  of  society.  Doubtless  the  fund  which  the 
Creator  has  provided  for  the  comfort,  culture  and  orna- 
ment of  human  life  is  sufficient,  if  entirely  utilized,  to 
confer  these  blessings  in  some  degree  on  all  parts  and 
portions  of  the  community.  When  this  end  fails  to  be 
accomplished,  when  a  small  portion  of  society  only  enjoy 
these  benefits  to  any  degree,  and  the  larger  remainder 
live  in  disgusting  squalor  and  rudeness,  the  beneficent 
designs  of  the  Creator  are  not  accomplished.  A  large 
portion  of  the  fund  which  he  has  provided  for  human 
culture  and  development  is  wrapped  in  a  napkin  and 
buried  in  the  earth.  For  example,  we  do  not  believe 
that  the  philanthropic  and  enlightened  Englishmen  who 
have  reflected  deeply  on  this  class  of  subjects,  would  for 
a  moment  hesitate  to  admit,  that  the  cultivation  of  the 
farms  of  England  might  be  much  better  accomplished 
than  it  is,  by  a  much  smaller  number  of  laborers  than 
are  now  employed,  if  those  laborers  were  stimulated  by 
the  hope  that  they  and  their  families  were  to  enjoy  the 


CONDITIONS    OF   GENERAL    PEACE.  275 

comforts  of  civilized  life.  There  is  at  this  moment  in  the 
economies  of  England  a  vast  waste  of  productive  power, 
which  might  be  developed  and  utilized  for  the  elevation 
of  those  degraded  masses.  The  same  number  of  la- 
borers under  the  influence  of  proper  stimuli  might  not 
only  produce  the  food  which  they  consume,  but  very 
many  comforts  and  beauties  of  life,  which  they  never 
enjoy.  The  same  must  be  true  wherever  vast  masses  of 
people  labor  throughout  life,  stimulated  by  no  hope, 
but  that  of  continuing  a  little  longer  their  wretched 
existence. 

§  203.  The  point  insisted  on  in  this  chapter  is,  that 
the  existence  in  any  of  the  nations  of  the  worlds  of  such  a 
vast  amount  of  unused  and  wasted  power  is  and  always 
must  be  a  destructive  element.  In  all  constitutions  of 
society,  it  threatens  sooner  or  later  to  break  out  into 
insurrection  and  anarchy.  If  you  reduce  large  masses 
to  the  helpless  and  dependent  condition  of  domestic 
animals,  you  do  not  thereby  impart  to  them  quiet  and 
unresisting  instincts.  You  cannot  so  subjugate  the 
.  human  soul  to  power,  that  it  will  not  retain  a  conscious- 
ness of  manhood,  and  an  intuition  of  the  rights  of  man- 
hood. It  is  always  a  thing  not  only  to  be  apprehended, 
but  expected  that,  perhaps  after  generations  of  passive 
subjection,  millions  of  these  degraded  men  will  at  length 
find  a  com.mon  expression  of  their  sense  of  injured  hu- 
manity, and  give  vent  to  their  long  pent  indignation,  by 
laying  waste  and  destroying  that  wealth  for  which  they 
and  their  fathers  have  labored,  but  which  they  have 
never  enjoyed.  That  tranquillity  and  social  order  which 
are  indispensable  to  the  development  of  the  great  eco- 
nomic forces  of  the  world  can  never  be  assured,  indeed 
must  always  be  in  great  peril,  while  the  mighty  nations 
that  have  the  peace  and  prosperity  of  mankind  in  their 
safe  keeping,  embody  within  themselves  vast  masses  of 


276  ECONOMICS. 

men  that  are  doomed  to  these  unnatural  conditions. 
Perhaps  there  is  not  a  nation  on  either  side  of  the  Atlan- 
tic, that  has  not  occasion  to  look  well  to  its  ill-conditioned 
and  sufiFering  masses,  lest  a  cancer  should  be  fastening* 
upon  the  body  politic,  destined  at  some  time  to  prove 
fatal  to  the  nation.  Such  phenomena  are  a  violation  of 
nature's  intention  wherever  they  exist,  and  cannot  be 
perpetuated  in  any  country  without  imminent  peril.  We 
ask  for  no  revolutionary  reforms.  We  have  shown  that 
all  which  can  be  done  for  such  neglected  classes  is,  to 
give  them  the  full  benefit  of  free  competition  for  the 
acquisition  of  any  species  of  capital  by  the  possession 
of  which  their  labor  may  be  rendered  efficient,  and  the 
opportunity  to  acquire  that  sturdy  substantial  intelli- 
gence, which  fits  men  for  success  in  the  practical  affairs 
of  life. 

§  204.  The  object  however  for  which  this  chapter 
was  especially  designed,  was  to  point  out  the  danger  to 
the  peace  of  the  worlds  which  results  from  the  existence  of 
such  degraded  masses.  If  the  government  of  a  nation  is 
largely  concentrated  in  the  will  of  one  man,  or  of  a  lim- 
ited privileged  class,  the  peace  of  the  world  is  always 
endangered  by  the  existence  of  unused  labor  power,  out 
of  which  armies  may  be  constructed.  Any  one  who  will 
attentively  consider  the  character  of  ancient  civilization, 
will  be  easily  convinced,  that  the  reason  of  its  warlike 
aspect  is  chiefly  to  be  found  in  the  fact,  that  the  masses 
of  the  people  were  in  a  degraded  condition.  They  en- 
joyed nothing,  they  hoped  for  nothing  but  the  bare  neces- 
saries of  life.  There  was  therefore  at  all  times  a  vast 
unused  labor  force.  It  was  disposable  and  could  be 
thrown  now  in  this  direction  and  now  in  that,  at  the 
caprice  of  powerful  rulers.  They  had  a  better  prospect 
of  enjoying  in  plenty  those  necessaries  of  life  to  which 
only  they  aspired,  in  the  service  of  the  state,  than  in  any 


CONDITIONS    OF   GENERAL   PEACE.  277 

private  employment  which  was  open  to  them.  They 
were  therefore  always  at  the  command  of  despotic  rulers, 
and  could  be  used  for  any  enterprises  on  which  their 
hearts  were  set.  They  might  sometimes  be  employed 
on  such  works  as  the  pyramids,  the  temples  of  the  gods 
and  the  massive  walls  of  cities.  But  they  generally  were 
employed  in  those  great  military  enterprises,  which  made 
the  history  of  antiquity  one  long  struggle  for  universal  do- 
minion, till  it  was  finally  won  by  Rome.  All  the  great 
empires  of  antiquity  were  conquered  and  held  together  by 
armies  made  up  of  such  material.  It  was  this  partial 
character  of  all  ancient  civilization,  which  made  military 
prowess  the  only  title  deed  by  which  any  nation  of 
antiquity  could  hold  one  foot  of  earth's  surface  as  its 
own. 

§  205.  Just  in  proportion  as  modern  society  embraces 
in  its  bosom  this  same  element,  it  is  in  similar  peril. 
Free  governments  that  are  thus  conditioned  are  in  con 
stant  danger  of  anarchy  and  military  despotism.  Govern- 
ments that  are  strong  and  concentrated  in  the  hands  of 
one  man  or  a  small  class,  if  a  large  portion  of  their  sub- 
jects are  in  the  condition  of  which  we  are  speaking,  con- 
stantly threaten  the  peace  of  all  their  neighbors.  It  is  not 
enough  that  by  book  education  the  people  be  instructed 
in  the  reading  and  writing  of  their  mother  tongue.  They 
7nust  acquire  a  standard  of  civilized  living^  which  will  ren- 
der them  no  longer  content,  for  themselves  and  their 
families,  with  the  bare  means  of  sustaining  existence,  and 
lead  then}  to  aspire  to  something  like  the  true  and  prop- 
er life  of  rational  manhood.  When  such  a  standard  of 
living  pervades  the  entire  people,  its  whole  labor  power 
will  be  in  demand,  to  supply  its  own  conscious  wants. 
There  will  be  no  disposable  hordes  of  half-civilized  men, 
fit  material  out  of  which  to  construct  great  conquering  ar- 
mies, to  fill  the  world  with  terror.     All  continental  Europe 


278  ^  ECONOMICS. 

*s  to-day  a  sad  testimony  to  the  truth  of  what  we  are 
saying. 

A  people  thus  internally  conditioned  will  he  strong  to 
repel  i?ivasion.  Any  foreign  power  will  trespass  on  its 
territory  at  its  peril.  But  it  will  be  incapable  of  disturbing 
the  peace  of  the  world  by  any  efforts  at  foreign  conquest. 
It  is  not  to  the  shame  but  to  the  glory  of  Britain,  that 
within  the  last  half  century  her  peaceful  industries  have 
been  so  greatly  extended,  and  her  labor  power  so 
absorbed  in  them,  that  she  can  no  longer  plunge  into 
foreign  wars  and  dictate  terms  to  the  nations  of  Europe 
at  the  cannon's  mouth,  as  she  did  in  the  end  of  the  last 
century  and  in  the  beginning  of  the  present.  It  would 
be  greatly  to  the  honor  of  her  continental  neighbors,  if 
they  were  in  this  respect  much  more  like  her  than  they  are. 
It  is  glorious  to  any  nation  on  earth,  that  it  is  too  intent 
on  the  pursuits  of  peaceful  industry,  too  much  occupied 
in  providing  for  all  the  wants  of  all  its  people,  to  have 
any  labor  power  to  waste  in  meddling  with  the  affairs  of 
its  neighbors,  and  too  much  love  of  country  and  of  lib- 
erty, not  to  defend  itself  against  all  invasions  of  its  soil, 
and  of  its  rights  among  the  nations.  It  would  be  still 
more  to  the  honor  of  Britain  if  she  could  so  modify  her 
internal  economies,  as  to  lift  up  into  the  light  those 
classes  of  her  laboring  population  that  are  now  deprived 
of  the  benefit  of  her  civilization,  and  make  the  law  of 
competition  as  efficient  to  protect  them  as  it  is  under  her 
present  arrangements  to  degrade  and  crush  them.  Till 
she  does  solve  this  problem,  the  future  of  her  freedom 
and  prosperity  will  be  in  peril. 

§  206.  Many  of  the  finest  intellects  and  the  most 
philanthropic  hearts  in  the  world  are  employed  in  earnest 
endeavor,  to  devise  some  method  by  which  for  the  ages 
to  come,  the  peace  of  the  world  may  be  preserved.  All 
good  men  in  all  lands  must  sympathize  with  their  aims, 


CONDITIONS   OF   GENERAL    PEACE,  279 

and  devoutly  desire  their  success.  But  we  must  express 
our  undoubting  conviction,  that  their  radical  and  per- 
manent success  is  impossible,  except  on  condition  of  first 
finding  a  complete  and  satisfactory  solution  of  the  prob- 
lem presented  in  this  chapter.  The  disease  is  internal, 
though  its  manifestation  is  external,  and  an  internal 
remedy  must  be  applied,  before  the  external  manifesta- 
tion will  cease.  The  root  of  the  evil  is  in  the  internal 
economies  of  society,  and  until  those  are  brought  into 
nearer  conformity  with  nature's  laws,  Europe  will  as  now 
bristle  with  bayonets.  "  I  made  war  on  Maria  Theresa," 
said  Frederic  the  Great,  "  because  I  had  men  and  money 
and  wanted  to  hear  myself  talked  about."  Any  powerful 
monarch  who  has  unused  material  out  of  which  he  can 
make  powerful  armies,  will  be  very  likely  to  make  war 
on  his  neighbors  for  no  better  reason,  than  that  he  de- 
sires the  celebrity  and  the  fame  of  a  warrior  and  a  con- 
queror. The  one  only  reason  why  an  army  of  more  than 
one  million  of  men  that  our  country  had  in  the  field  at 
the  close  of  our  great  civil  war  mingled  with  the  people 
and  disappeared  forever  from  view  in  the  short  space  of 
three  months,  is  to  be  found  in  the  fact,  that  that  army 
was  composed  of  men  who  longed  to  return  to  civilized 
homes  and  peaceful  industries,  from  which  they  expected 
to  derive  prosperity  and  happiness  for  themselves  and 
their  families.  Employ  the  whole  labor  power  of  a  nation 
with  such  efficiency  as  civilized  and  enlightened  men  can 
attain,  in  such  pursuits  as  these,  and  with  such  hopes, 
and  there  will  remain  nothing  out  of  which  to  construct 
permanent  armies,  or  any  armies  at  all,  except  to  meet 
the  urgent  necessities  of  national  defense  and  preserva- 
tion. For  these  purposes  armies  may  be  made  quickly, 
and  will  be  as  quickly  dissolved  when  the  end  is  accom- 
plished. The  rulers  of  nations  whose  internal  economies 
are  thus  adjusted,  will  be  powerful  still  to  protect  and 


28o  ECONOMICS. 

bless  the  people,  but  powerless  to  disturb  the  peace  of 
the  world.  Such  nations  cannot  be  warlike,  they  will 
"  beat  their  swords  into  plowshares  and  their  spears  into 
pruning-hooks." 


CHAPTER   XIII. 
Substitutes  for  Competition,     Socialism. 

§  207.  We  think  it  has  been  made  apparent  in  the 
progress  of  this  treatise,  that  competition  is  no  device 
of  man,  but  a  permanent  law  of  nature ;  and  that  it  as 
naturally  bears  sway  in  all  the  transactions  of  exchange, 
and  in  the  distribution  of  wealth  between  the  parties 
concerned  in  producing  it,  as  the  law  of  gravitation 
controls  the  movements  of  the  planets  in  their  orbits. 
From  this  it  would  seem  to  follow,  that  all  those  who  are 
dissatisfied  with  the  working  of  competition  have  their 
quarrel  with  human  nature  itself.  We  think  also  that  it 
has  been  made  apparent,  that  this  law  of  nature  is,  like 
every  other,  beneficent,  that  it  provides  for  the  protection 
and  well-being  of  all  classes  of  men,  in  all  the  conditions 
of  life,  and  for  the  steady  progress  of  the  race  as  a  whole, 
in  all  that  is  useful  to  man. 

But  there  are  still  not  wanting  those  who  are  dissat- 
isfied with  the  results  of  competition,  and  are  earnestly 
looking  around  them  in  the  hope  of  discovering  some 
other  and  better  system,  according  to  which  the  econo- 
mies of  the  world  may  be  constructed.  It  must  be  ad- 
mitted, that  there  is  much  in  the  present  condition  of  the 
world  to  excite  disgust  and  heart-sickness  at  the  things 
that  are,  and  a  vague  and  indefinite  longing  for  some- 
thing better,  of  which  however  few  minds  seem  to  have 
formed  any  definite  conception.     Perhaps  the  long  and 


SUBSTITUTES    FOR   COMPETITION.  28 1 

painful  conflict  which  seems  to  be  everywhere  raging 
between  capitalists  who  employ  labor,  and  laborers  who 
work  upon  other  men's  capital,  has  more  influence  in 
producing  this  mental  anxiety  than  any  other  cause. 
It  has  produced  wide-spread  distrust  of  the  present 
Older  of  things,  and  a  vague  longing  for  the  re-adjust- 
ment of  capital  and  labor  on  some  other  principle  than 
that  of  competition.  Cooperation  is  the  word  which 
many  persons  and  many  schools  of  social  reformers  have 
chosen  to  express  that  unknown  new  order  of  things  for 
which  they  are  seeking,  much  as  x  and  y  are  used  to 
denote  unknown  quantities  in  algebra.  The  word  can 
not  be  defined  till  the  problems  in  the  statement  of  which 
it  is  employed  shall  have  besn  solved. 

Some  use  this  word  and  socialism  almost  inter- 
changeably, meaning  by  it  a  new  organization  of  labor 
and  capital,  by  which  capital  shall  be  controlled  by  com' 
munities,  not  by  rich  individuals,  communities  shall  be  reck- 
o?ied  the  owners  of  the  wealth  created  by  their  individual 
members,  and  the  individual,  being  absorbed  in  the  com- 
munity, shall  rely  on  the  community  for  support.  This 
is  socialism  pure  and  si7nple. 

Others  are  aiming  at  a  modified  socialism,  in  which 
the  capital  of  all  the  members  of  the  community  shall  be 
managed  and  their  labor  directed  by  the  society ;  but 
each  member  on  the  other  hand  shall  be  credited  with 
the  capital  he  has  furnished,  and  with  the  labor  which 
he  performs.  All  labor  is  to  be  classified  by  the  officials 
of  the  community,  and  rated  according  to  the  degree  of 
skill  it  requires.  Every  member  is  to  have  the  neces- 
saries of  life  from  the  common  fund,  and  if  profits  accrue 
from  the  industry  of  the  community,  they  are  to  be  dis- 
tributed among  the  members,  in  proportion  to  the  cap- 
ital furnished,  and  the  relative  value  of  labor  performed 
by  each. 


282  ECONOMICS. 

Another  conception  of  cooperation  is  that  of  an  ar- 
rangement for  dispensing  with  the  services  of  the  middh 
men,  and  enabling  many  consumers,  by  combining  in 
their  purchases,  to  obtain  commodities  directly,  either 
from  importers  or  manufacturers,  at  wholesale  prices. 
Cooperative  or  union  stores  are  of  this  character.  So 
far  as  we  are  informed,  little  success  has  attended  such 
efforts  in  this  country,  but  a  good  deal  of  sliccess  has 
been  attained  to  in  other  countries. 

Others  still  intend  by  co-operation  such  an  arrange- 
ment as  will  enable  the  laborer  in  some  foi-m  to  share  the 
profits  of  production. 

There  are  also  some  other  conceptions  of  the  or- 
ganization of  labor  for  the  purpose  of  protecting  the 
laborer  from  competition,  which  will  require  consid- 
eration. 

§  208.  The  first  of  these  modes  of  organization, 
which  we  have  characterized  as  socialism  pure  and  simple^ 
will  require  but  little  space  here.  It  proposes  to  treat 
what  we  have  throughout  this  treatise  assumed  to  be  a 
fundamental  law  of  human  nature,  as  a  nullity.  If  the 
ideas  upon  which  such  a  system  of  social  organization 
must  be  founded  are  true,  then  there  can  be  no  such 
science  as  that  which  we  are  endeavoring  to  expound. 
No  man  who  accepts  the  fundamental  law  which  we 
enunciated  at  the  outset,  and  appreciates  the  irresistible 
force  of  such  a  law  can  for  a  moment  think  the  experi- 
ment proposed  by  these  men  worth  trying.  Man  is  no 
more  adapted  to  such  a  life,  than  the  barn  fowl  is  to  live 
on  the  water.  He  is  formed  for  individual  self-care, 
self-support,  self-reliance,  self-direction.  The  desire  for 
individual  possession  and  the  sense  of  individual  rights 
are  in  every  man  strong,  clear  and  irrepressible.  The 
attempt  to  place  such  a  being  in  a  community,  which,  by 
its  united  or  corporate  will  and  judgment,  is  to  super- 


SUBSTITUTES    FOR    COMPETITION.  283 

cede  all  individual  will  and  judgment,  and  reduce  each 
man  to  a  machine  to  be  impelled  and  guided  in  the  ap- 
plication of  his  powers  by  a  personality  not  his  own,  and 
patiently  to  accept  through  life  and  for  his  children  after 
him  such  results  of  his  labor  as  the  community  may 
allot, — such  an  attempt  cannot  succeed.  The  incorrigi- 
bly lazy,  the  men  without  enterprise,  without  high  pur- 
pose, or  any  sense  of  personal  dignity,  may  be  satisfied 
with  such  a  life  as  a  convenient  way  of  living  on  the  pro- 
ducts of  other  men's  labor  and  other  men's  wits.  The 
artful  and  unscrupulous  demagogue  may  be  delighted 
with  such  an  organization  of  easy-going  enthusiasts,  as 
furnishing  him  an  excellent  opportunity  of  getting  other 
men's  earnings  entrusted  to  his  care,  and  profiting  by 
the  credulity  of  the  simple.  But  upright,  honorable, 
intelligent,  industrious  men  will  neither  be  willing  to 
work  for  the  support  of  the  indolent,  nor  content,  for  any 
great-length  of  time,  with  the  results  which  will  come  to 
them  from  a  life  of  toil  under  the  direction  of  others. 
This  is  not  human  life.  This  is  not  human  society.  The 
perfection  of  human  development  cannot  be  obtained 
under  such  conditions.  Investigators  however  sagacious 
will  search  in  vain  in  human  nature  for  the  "  attractions  '* 
by  which  such  communities  can  be  organized  and  held 
together.  They  must,  in  the  future  as  in  the  past,  soon 
fall  to  pieces  and  come  to  nought.  It  is  the  law  of 
human  nature,  and  must  be  the  law  of  all  human  society, 
that  the  individual  man  is  responsible  for  his  own  sup- 
port, and  the  owner  of  all  which  he  produces.  Nature 
herself  has  provided  a  modification  of  this  law  in  domes- 
tic society,  human  ingenuity  can  devise  no  other.  At  all 
events  as  economists  we  need  pursue  this  matter  no  fur- 
ther. It  is  quite  outside  of  that  fundamental  law  which 
we  accepted  at  the  outset,  as  the  germ  from  which  our 
science  must  grow.     If  such  experiments  can  succeed,  it 


284  ECONOMICS. 

must  be  by  finding  somewhere  in  the  world  a  human 
nature  with  which  we  are  quite  unacquainted. 

It  should  also  be  borne  in  mind,  that  no  temporary 
success  of  a  community  founded  on  this  principle  can 
prove  the  soundness  of  the  theory.  Such  an  experiment 
is  made  in  the  midst  of  the  civilization  which  has  been 
growing  up  for  ages  on  the  principle  of  competition,  and 
must  use  a  thousand  advantages  and  helps  which  have 
originated  from  that  very  competition  which  the  advo- 
cates of  this  theory  reject.  It  is  necessary  to  prove 
more  than  that  a  community  of  socialists  can  live  amid 
the  sustaining  influence  of  the  civilization  of  the  nine- 
teenth century  and  guided  by  the  light  of  ages.  It  must 
be  shown  that  it  can  stand  alone,  grow  from  its  own 
roots,  and  mature  a  civilization  by  the  development  of  its 
own  laws. 

§  209.  That  scheme  of  socialism  which  we  have  just 
considered  seeks  to  eli?ninafe  the  idea  of  individual  owner- 
ship  from  the  human  soul,  and  treats  all  competition,  not 
as  a  law  of  nature,  but  as  a  mean  and  mischievous 
selfishness.  The  modified  form  of  socialism  of  which  we 
are  next  to  speak  does  not  wholly  discard  individual 
ownership,  but  denies  to  the  individul  any  appeal  to  com- 
petition for  the  protection  of  his  right  to  the  results  of  his  own 
labor.  The  officials  of  the  community  must  grade  all 
labor,  and  assign  to  each  class  its  relative  price.  It  is 
impossible  they  should  do  this  with  any  pretense  of  jus- 
tice in  any  other  way  than  by  reference  to  the  current 
wages  of  labor  as  fixed  by  competition.  A  community 
organized  to  protect  its  members  from  all  competition  is 
therefore  dependent,  in  adjusting  its  most  important  and 
delicate  arrangements,  on  results  which  never  could  have 
been  attained  to,  except  under  the  free  competition  of 
that  society  at  large,  against  which  its  existence  is  a  per- 
petual protest.     It  is  not  therefore  a  system  within  itself. 


SUBSTITUTES    FOR    COMPETITION.  285 

While  it  rejects  and  condemns  as  oppressive  that  organi- 
zation of  industry  which  free  competition  produces,  it  is 
glad  enough  to  guide  its  own  way  in  the  darkness  which 
its  negations  have  created,  by  the  light  which  that  hated 
and  rejected  system  emits.  It  refuses  competition  to 
its  own  members.  But  it  is  still  compelled  to  settle  the 
property  rights  of  its  members  by  rules  which  that  very 
competition  has  established.  Such  a  community  has 
surely  very  little  reason  to  boast  of  the  progress  it  has 
made  in  organizing  a  new  system  for  the  cooperation  of 
labor  and  capital.  How  would  it  settle  matters  among 
its  members,  if  all  the  rest  of  the  world  should  be  con- 
verted to  its  ''new  system  ?" 

In  other  respects  this  form  of  communism  is  liable  to 
nearly  the  same  objections  which  have  been  urged  against 
socialism  pure  and  simple,  though  perhaps  in  a  less  de- 
gree. The  lazy,  the  stupid,  the  careless  of  the  future,  are 
made  sure  of  support  by  the  labor,  the  skill,  the  foresight 
of  others.  The  crafty,  the  cunning,  the  unscrupulous 
have  still  an  inviting  chance  of  practicing  on  the  easy 
credulity  and  unsuspecting  thoughtlessness  of  enthusi- 
asts ignorant  of  human  nature,  and  too  good  naturedly  in- 
dolent to  take  care  of  themselves.  It  is  an  admirable 
device  for  enabling  those  who  will  not  or  cannot  work,  to 
live  by  the  skill  and  pains-taking  industry  of  those  who 
will.  Such  a  system  is  in  open  conflict  with  human  na- 
ture, and  we  need  not  be  at  the  trouble  of  arguing  against 
it.  Those  laws  of  nature  against  which  it  has  arrayed 
itself  are  quite  strong  enough  to  vanquish  it  without  an} 
help  from  us. 

§  210.  Those  organizations  of  consumers  which  are 
formed  for  the  purpose  of  dispensing  with  the  services  of 
retail  dealers^  and  deriving  supplies  directly  from  the  im- 
porter or  the  manufacturer,  with  little  or  no  addition  to 
wholesale  prices,  need  not  detain  us  long.     They  violate 


286  ECONOMICS. 

no  economic  principle.  It  is  of  course  desirable  that  the 
consumer  of  a  commodity  should  obtain  it  from  the 
original  source  of  supply  through  as  few  hands  as  pos- 
sible, for  he  must  pay  a  profit  on  each  transaction  of  ex- 
change. The  question,  for  example,  how  the  products 
of  the  great  manufactory  may  be  most  advantageously 
distributed  to  the  consumers  is  a  lair  and  open  field  for 
the  exercise  of  ingenuity  and  skill.  The  economist  will 
not  hesitate  to  pronounce  that  plan  the  best,  which  on 
the  whole  accomplishes  the  distribution  most  cheaply." 
An  examination  of  the  methods  which  have  been  adopted 
for  this  purpose  under  the  name  of  cooperation,  will  show 
that  none  of  them  are  complete  in  themselves.  They 
are  not  solutions  of  the  problem  for  universal  use.  For 
example  in  many  of  them  many  consumers  unite  in  fur- 
nishing the  capital.  Commodities  are  then  purchased  of 
the  manufacturer  or  importer  at  wholesale  prices  as 
regulated  by  the  general  law  of  competition.  They  are 
then  sold  out  to  the  combined  consumers  at  customary 
retail  prices,  and  the  net  profits  are  divided  in  propor- 
tion to  the  capital  furnished.  Of  course  both  the  price 
at  which  the  goods  were  originally  purchased,  and 
those  at  which  they  are  disposed  of  to  the  consumer  are 
determined  in  the  ordinary  method  of  competition.  The 
whole  system  is  therefore  founded  on  unmodified  compe- 
tition, and  is  no  solution  of  the  general  question.  This 
is  no  reason  why  individuals  should  not  resort  to  such 
methods  when  they  find  they  can  be  benefited  by  them. 
But  it  does  suggest  a  doubt,  whether  they  are  likely  to 
prove  extensively  and  permanently  applicable.  The 
present  system  of  retail  dealers  is  the  result  of  long  ex- 
perience, and  it  is  very  probable  that  many  and  unex- 
pected difficulties  will  be  encountered  in  the  attempt  to 
dispense  with  it.  We  see  no  reason  however  for  making 
any  show  of  those  difficulties.     We  shall  rejoice  in  any 


SUBSTITUTES    FOR   COMPETITION  287 

success  which  may  attend  experiments  of  this  sort,  as  in 
all  successful  applications  of  labor-saving  machinery. 
Such  it  would  really  be. 

§  211.  Cooperation  as  a  means  oi giving  to  the  laborer 
the  advantage  of  an  interest  in  the  results  of  his  own  labor ^ 
deserves  more  attention.  We  have  already  remarked, 
that  the  most  perfect  system  of  labor  is  that  in  which, 
to  the  greatest  extent,  the  laborer  owns  the  capital  which 
he  uses.  As  all  which  he  produces  is  then  his  own,  the 
stimulus  which  impels  him  to  labor,  and  to  use  all  his 
powers  both  of  mind  and  body  in  rendering  the  results 
in  the  highest  degree  abundant  and  excellent,  is  as  strong 
as  possible.  A  man  acting  under  such  a  stimulus  will 
invariably  accomplish  more,  than  the  same  man  would 
accomplish  if  he  had  no  interest  in  the  matter,  except  to 
obtain  his  daily  wages.  Any  constitution  of  society 
either  by  law  or  custom,  which  tends  to  divide  men  into 
two  classes,  a  small  class  owning  all  the  capital  and 
under  no  necessity  of  performing  any  labor,  and  a  large 
class  having  no  capital  and  doing  all  the  work  of  society, 
is  economically  bad,  and  on  economic  grounds  should  be 
reformed  if  reform  is  possible. 

We  have  already  indicated  what  the  needed  reform  in 
respect  to  agricutural  labor  is.  In  every  country  under 
heaven  the  true  cooperation  of  agricultural  labor  and 
capital  is  the  ownership  of  the  land  by  the  men  that  till 
it.  The  true  movement  towards  such  cooperation  is  not 
the  compulsory  equal  division  of  estates  practiced  in 
France,  but  absolute  free  trade  in  land.  We  do  not 
believe  that  any  scheme  which  philanthropy  can  devise 
will  reach  far  towards  the  so  much  to  be  desired  improve- 
ment of  the  condition  of  agricultural  laborers,  without 
the  abolition  of  land  monopoly.  Some  land  owners  may 
be  humane  and  wise  enough  to  try  and  to  succeed  in  the 
experiment  of  giving  their  laborers,  in  addition  to  living 


288  ECONOMICS. 

wages,  an  interest  in  the  products  of  the  farm.  Such  an 
arrangement  would  no  doubt  be  as  wise  as  philanthropic. 
Any  employer  can  afford,  on  the  simple  principles  of 
gain  and  loss,  to  pay  to  a  laborer  who  knows  that  he  has 
an  interest  in  the  profits  of  his  work,  more  wages  than  to 
one  who  feels  no  impulse  of  hope  of  a  future  better  than 
the  present.  But  it  should  not  be  forgotten,  that  such  a 
boon  is  no  compensation  to  the  laborer  for  being  per- 
petually excluded  from  the  proprietorship  of  the  land, 
nor  is  even  this  small  boon  likely  to  be  often  extended 
to  the  laborer  under  the  present  system. 

Something  may  be  done  for  the  laborer  by  education. 
Of  that  we  have  spoken  in  a  previous  chapter.  Those 
who  are  well  acquainted  with  our  great  system  of  public 
education  will  not  be  very  sanguine  as  to  what  mere 
book  education  can  do,  except  under  favoring  circum- 
stances in  other  respects.  Few  of  us  will  believe,  that 
the  laborer  can  be  educated  into  comfort,  while  he  still 
remains  the  hopeless  drudge,  deprived  of  all  prospect  of 
ever  becoming  the  lord  of  the  soil. 

As  to  such  cooperation  as  we  are  now  speaking  of, 
in  other  modes  of  production  than  agriculture,  there  is 
no  natural  obstacle  in  the  way  of  applying  it  to  any  de- 
sirable extent.  But  it  is  entirely  at  the  option  of  em- 
ployers to  adopt  or  reject  it,  and  we  have  not  much  hope 
of  obtaining  a  general  reform  from  the  philanthropy  of 
employers.  We  do  not  deny  that  they  are  as  philan- 
thropic as  other  men,  but  most  men  are  slow  to  carry 
philanthropy  into  business  arrangements.  They  are 
much  more  apt  to  construct  them  according  to  the  cold, 
hard  laws  of  profit  and  loss,  than  to  take  any  philan- 
thropic considerations  into  the  account.  If  it  can  be 
demonstrated  by  experiment,  that  to  admit  laborers  to  a 
share  of  profits  is  the  most  profitable  mode  of  manage- 
ment, we  should  then  hope,  that,  like  any  other  new  and 


SUBSTITUTES    FOR   COMPETITION.  289 

useful  invention,  it  would  be  adopted  into  general  use ; 
and  if  so  adopted  we  should  believe  it  would  greatly  in- 
crease the  profits  of  the  manufacturer  and  the  thrift  and 
comfort  of  those  who  live  by  labor.  The  subject  is  cer- 
tainly worthy  the  diligent  study  both  of  the  philanthro- 
pist and  the  capitalist.  Perhaps  nothing  would  tend 
more  powerfully  to  bring  to  a  happy  termination  the  con- 
flict which  has  been  so  long  raging  between  capitalists 
and  laborers  without  capital,  and  unite  as  friends  those 
who  now  so  often  regard  each  other  as  natural  enemies. 
The  continued  prosperity  of  all  branches  of  industry,  the 
peace  of  society,  as  well  as  the  comfort  and  happiness 
of  all  who  work  with  other  men's  capital,  imperatively 
require,  that  in  some  way  cooperative  and  friendly  rela- 
tions should  be  established  between  these  two  parties  as 
speedily  and  as  widely  as  possible. 

No  reason  exists  in  the  nature  of  the  case,  why  at 
least  a  portion  of  the  capital  of  a  joint  stock  company  should 
not  he  thrown  open  to  the  competition  of  operatives^  thus  en- 
abling them,  if  disposed,  to  invest  their  savings  in  the 
stock  of  the  company.  Of  course  those  who  have  sup- 
plied the  larger  portion  of  the  capital  would  reasonably 
wish  to  retain  the  control  of  its  management.  But  this 
is  no  reason  why  operatives  might  not  be  permitted  and 
encouraged  to  purchase  a  minority  of  the  stock.  Such 
an  arrangement  would  greatly  benefit  the  operatives,  by 
affording  them  a  desirable  investment  for  all  their  sav- 
ings, and  their  employers  also  by  insuring  the  good  will 
of  employes,  and  a  deep  personal  interest  in  the  pros- 
perity of  the  company.  Such  experiments  are  eminently 
worth  trying  in  the  present  relations  of  employers  and 
employes  to  each  other,  and  both  capitalists  and  philan- 
thropists have  a  very  deep  interest  in  them. 

§  212.  Such  modes  of  cooperation  as  the  last  two  we 
have  considered  are  not  at  all  kindred  to  socialism.  They 
13 


290  ECONOMICS. 

leave  the  ownership  of  all  property  intact.  In  the  case 
of  the  co-operative  store,  competition  is  only  removed 
one  step  farther  back,  from  the  retail  merchant  (whose 
services  are  dispensed  with)  to  the  wholesale  merchant. 
Prices  are  determined  just  as  in  the  ordinary  method  of 
obtaining  supplies  through  the  retail  merchant.  In  the 
case  in  which  employes  become  sharers  in  the  profits  of 
trade,  it  is  only  another  method  of  paying  wages.  The 
wages  paid  are  not  a  fixed  amount,  but  depend  in  part 
on  the  profits  realized.  Should  any  company  succeed  in 
so  establishing  this  cooperative  system,  that  it  should  be 
seen  to  give  to  its  employes  a  decided  advantage,  other 
operatives  would  be  anxious  to  be  employed  by  that 
company,  and  other  employers  would  be  under  a  neces- 
sity of  adopting  the  same  system,  in  order  to  compete 
successfully  for  laborers.  This  consideration  encourages 
the  hope,  that  if  co-operation  is  really  practicable  and 
capable  of  being  made  beneficial,  it  may  come  into  gen- 
eral use.  It  has  the  same  chance  of  being  generally 
adopted  as  any  other  really  good  invention.  It  will 
prove  true  in  this  case  as  in  so  many  others,  that  if  tried 
and  found  to  be  good,  competition  will  compel  everybody 
to  adopt  it. 

We  cannot  leave  this  subject  without  saying  emphatic- 
ally, that  there  can  be  no  more  mistaken  philanthropy  than 
that  which  assails  the  law  of  competition  in  the  interest  of 
the  laborer.  There  are  but  two  possible  methods  of  di- 
viding profits  between  the  laborer  and  the  capitalist. 
One  is  the  method  of  competition,  the  other  the  method 
of  force.  If  the  latter  is  to  be  resorted  to,  it  must  be 
done  either  by  enforcing  the  will  of  the  laborer  or  the 
will  of  the  capitalist.  If  the  laborer  is  to  enforce  his 
arbitrary  will,  capital  will  cease  to  be  accumulated,  the 
capitalist  can  gain  nothing  and  will  therefore  have  no 
motive  to  employ  his  capital,  or  to  save  his  gains  if  any 


SUBSTITUTES    FOR    COMPETITION.  29! 

were    acquired.      Capital  will   decline,  production   will 
languish,  and  the  laborer  will  be  without  employment. 

But  if  the  will  of  the  capitalist  is  to  be  enforced^  the 
laborer  will  be  a  slave.  The  only  hope  of  the  laborer  is 
in  meeting  his  employer  on  equal  terms,  and  entering  into 
a  contract  with  him  with  the  free  consent  of  both  parties. 
This  is  the  freedom  of  labor  and  the  freedom  of  capital, 
and  there  can  be  no  other  freedom  of  either.  Philan- 
thropy and  economy  are  perfectly  at  one  in  so  organiz- 
ing labor  and  capital,  that  in  all  cases  these  two  parties 
shall  meet  each  other  under  such  conditions,  that  com- 
petition shall  have  its  free  and  unobstructed  course. 

§  213.  Two  so-called  reforms  have  been  proposed  in 
the  interest  of  socialism  which  merit  a  passing  notice, 
more  as  an  illustration  of  the  utter  anarchy  which  has 
taken  possession  of  the  minds  of  that  class  of  men,  than 
because  they  are  really  worthy  of  any  serious  considera- 
tion. We  shall  first  consider  the  entire  land  revolution 
which  has  been  proposed.  The  scheme  is,  that  private 
ownership  of  land  shall  be  abolished^  and  the  state  itself 
shall  become  the  sole  land-holder^  and  that  it  shall  assign 
the  use  of  particular  portions  of  land  to  each  cultivator, 
according  to  rules  prescribed  by  law.  The  first  question 
which  presents  itself  to  the  mind  in  view  of  such  a  prop- 
osition, respects  the  method  by  which  the  state  is  to 
become  the  owner  of  the  land.  The  more  respectable 
of  those  who  advocate  this  theory  would  deny  that  they 
have  any  thought  of  depriving  the  owners  of  land  of  their 
property  without  compensation.  If  this  is  so,  then  a 
nation  situated  as  ours  is  must,  by  a  single  act  of  legisla- 
tion, incur  a  debt  equal  to  the  entire  value  of  ail  the 
lands  of  the  United  States  now  owned  by  individuals. 
The  owners  of  the  property  must  be  divested  of  it,  and 
compelled  to  receive  in  compensation  for  it  the  promises 
of  the  government  to  pay.     The  first  step  therefore  in 


292  ECONOMICS. 

the  execution  of  this  scheme  must  be  2i  forced  loan,  equal 
in  amount  to  the  value  of  all  the  landed  property  in  the 
United  States. 

One  is  impelled  next  to  ask,  how  is  the  interest  of  this 
loan  to  be  paid?  If  we  are  told  that  it  is  to  be  by  the 
rent  of  the  land,  then  we  ask,  in  what  manner  the  land  is 
to  be  rented  ?  If  it  is  to  be  thrown  open  to  free  compe- 
tition, rents  will  be  as  dear  as  now,  and  it  is  impossible 
to  see  what  benefit  the  landless  cultivator  of  the  soil  can 
derive  from  this  stupendous  revolution.  And  yet  if  the 
state  has  stipulated  to  pay  to  the  divested  owners  the 
full  value  of  their  land,  full  rents  must  be  obtained,  or 
the  state  will  not  receive  enough  for  rents  to  make  its 
annual  payment  of  interest.  A  constantly  increasing 
deficiency  of  income  must  involve  the  state  in  inevitable 
bankruptcy.  If  the  intention  is  to  assign  lands  to  the 
cultivator  at  a  reduced  rate  of  interest,  then  national 
bankruptcy  is  inevitable.  On  that  supposition  competi- 
tion in  the  assignment  of  lands  would  be  out  of  the  ques- 
tion. That  is  the  enemy  which  the  scheme  is  intended 
to  crush.  How  then  is  it  to  be  determined  who  are  to 
enjoy  the  most  desirable  parcels  of  land?  Evidently 
there  are  only  two  methods  by  which  it  is  possible  that 
this  should  be  determined.  Either  they  must  be  allotted 
to  those  who  will  pay  most  for  them,  and  in  that  case 
this  whole  revolution  will  be  a  failure,  or  else  they  must 
be  assigned  to  the  favorites  of  the  government,  than 
which  nothing  more  odious  and  tyrannical  can  be  im- 
agined. 

§  214.  We  must  believe  that  this  wild  scheme  of  in- 
iquity and  folly  is  a  very  natural  off^shoot  from  the  almost 
equally  unsound  principles  which  have  underlain  the  land' 
tenures  of  Europe  for  ages.  To  a  very  great  extent,  those 
land  tenures  have  been,  it  is  sad  to  say  are  even  now,  in 
flagrant  violation  of  the  only  economic  law  which  can  be 


SUBSTITUTES    FOR   COMPETITION.  293 

defended  on  strict  principles  of  natural  justice.  When 
the  legislation  of  the  nation  violates  fundamental  eco- 
nomic law,  the  wildest  confusion  of  thought  will  get  pos- 
session of  the  minds  of  men,  and  anarchic  ideas  will  pre- 
vail more  and  more  till  the  abuse  is  corrected.  The 
insane  theories  in  relation  to  the  nature  and  functions  of 
money,  which  have  gained  prevalence  since  the  passage  of 
thf*  Legal  Tender  Law  of  1862,  afford  a  striking  illustration 
of  the  truth  of  this  remark.  Had  the  legislation  of  Europe 
for  centuries  recognized  the  simple  truth,  that  the  owner- 
ship of  land  differs  not  at  all  in  its  nature  from  the  own- 
ership of  any  other  species  of  property,  and  permitted 
the  exercise  of  that  right  of  free  exchange  in  respect  to 
it,  which  is  implied  in  the  very  nature  of  ownership,  such 
theories  could  never  have  gained  possession  of  even  a 
portion  of  the  national  mind.  There  is  little  hope  of 
successfully  meeting  such  theories  by  argument,  till  the 
land  tenures  of  the  several  countries  are  brought  into 
conformity  with  natural  justice.  Even  in  France,  the 
existing  order  of  things  is  far  from  satisfactory.  The 
owner  of  land  has  a  right  to  bestow  it  at  his  death  ac- 
cording to  his  own  will  and  judgment,  and  the  law  re- 
quiring the  equal  distribution  of  it  among  his  heirs  is  an 
assumption,  on  the  part  of  the  state,  of  a  right  to  inter- 
fere in  the  matter,  which  could  not  exist  or  be  supposed 
to  exist,  if  the  proprietor  was  admitted  to  have  the  same 
absolute  ownership  of  land  as  of  any  other  property. 
The  right  to  interfere  in  one  way  with  the  matter,  implies 
the  right  to  interfere  in  any  other  way,  at  the  discretion  of 
the  state.  Free  trade  in  land  is  the  only  weapon  b} 
which  tendencies  to  such  anarchy  can  be  eliminated  from 
the  public  mind. 

§  2 15.  The  other  proposition  of  the  socialist  reformers 
on  which  we  purpose  to  say  a  few  words,  is  the  claim  thai 
it  is  the  duty  of  the  government  to  provide  employment  and 


294  ECONOMICS. 

pay  wages  to  all  unemployed  laborers.  This  claim  has 
been  more  insisted  on  by  these  reformers  than  any  other. 
It  has  cut  an  important  figure  in  some  of  the  great  rev- 
olutions of  Europe,  and  there  probably  is  no  country  in 
Christendom,  in  which  it  has  not  at  times  been  asserted 
with  so  much  energy  and  show  of  force,  as  in  some  de- 
gree to  endanger  the  public  peace.  It  is  the  most  rad- 
ical and  the  most  subversive  of  all  social  order  of  any  of 
the  wild  schemes  of  the  sect.  It  is  in  principle  an  utter 
negation  of  the  right  of  private  property.  When  it  is 
asserted  that  the  state  is  bound  to  provide  employment 
and  wages  for  every  unemployed  laborer,  it  should  not 
be  forgotten,  that  the  state  is  not  a  producer  and  there- 
fore not  an  owner  of  property,  except  so  much  as  is 
needed  for  its  public  uses.  What  therefore  it  gives  to 
one,  it  must  take  from  another.  If  therefore  the  state  is 
bound  to  see  to  it  that  every  man  has  a  living  (and  this 
is  what  the  claim  amounts  to),  the  meaning  is,  that  the 
state  is  a  personality  charged  with  the  right  and  the  duty 
of  taking  from  those  that  have,  and  giving  to  those  that 
have  not,  just  so  much  as  their  necessities  may  seem  to 
require.  The  property  which  the  state  will  protect  for 
any  citizen  is  not  that  which  he  has  earned  and  therefore 
rightfully  owns,  but  what  the  state  may  see  fit  to  leave 
him,  after  taking  from  him  what  it  may  think  necessary 
to  supply  the  wants  of  his  neighbors.  Every  man  is 
freed  from  all  apprehension  of  want.  If  times  are  pros- 
perous and  wages  high,  one  has  on  the  one  hand  no  fear 
of  want  however  prodigal  he  may  be,  for  if  times  become 
hard,  and  he  is  out  of  employment,  the  state  will  provide 
for  him  ;  and  on  the  other  hand  he  has  no  motive  to 
accumulate,  for  if  he  does  the  state  may  at  any  time  take 
it  away  from  him,  to  supply  the  wants  of  those  who  waste 
all  their  earnings  in  reckless  prodigality.  If  he  becomes 
discontented  with  his  wages,  he  has  no  fear  of  losing  his 


TAXATION.  295 

place  by  engaging  in  a  strike,  for  if  he  finds  himself 
unemployed,  the  state  is  bound  to  employ  him  and  pay 
him  wages.  It  needs  no  argument  to  show  that  such 
doctrines  as  these  are  destructive  of  all  rights  of  prop- 
erty, all  social  order,  and  of  civilization  itself. 

It  becomes  every  honest  statesman  and  true  philan- 
thropist to  turn  a  scrutinizing  eye  upon  our  whole  system 
of  legislation,  to  discover  if  possible  any  trace  of  the 
recognition  of  these  anarchic  teachings.  Socialism  is  a 
madness,  but  there  is  much  method  in  it ;  and  if  we  allow 
ourselves  to  admit  into  any  part  of  our  system,  and  re- 
tain there  any  germ  of  socialism,  it  will  be  developed 
rapidly,  and  bear  fruit  after  its  kind.  Our  poor  laws, 
our  public  charities,  our  system  of  public  education  at 
the  expense  of  the  state,  and  all  our  legislation  in  respect 
to  the  relations  of  laborers  to  their  employers  should  be 
carefully  examined,  and  in  every  particular  placed  upon 
a  basis  of  sound  economic  principles.  It  is  the  business 
of  the  statesman  and  the  moralist  and  not  of  the  econo- 
mist to  pursue  this  investigation.  The  signs  that  this 
leaven  of  mischief  and  anarchy  is  present  and  working 
upon  the  masses  of  American  society,  are  painfully  ap- 
parent to  every  thoughtful  observer  of  the  passing  scene. 


CHAPTER   XIV. 

Taxation, 


§  216.  Should  the  suggestion  be  made  that  this  is 
not  the  proper  place  for  the  discussion  of  this  subject, 
our  answer  is,  that  perhaps  the  suggestion  might  have 
been  equally  appropriate,  if  it  had  been  introduced  else- 


Zgb  ECONOMICS. 

where.  TAe  relation  of  taxation  to  economics  is  not  logical 
but  accidental,  and  therefore  a  treatise  on  that  science 
has  no  logical  place  for  it.  And  yet  it  is  so  connected 
with  all  the  economies  of  society,  that  it  cannot  be  passed 
by  in  silence.  The  science  must  at  all  points  assume, 
that  those  natural  laws  which  it  would  construct  into  a 
system  must  have  free  action,  without  being  turned  aside 
from  their  natural  course  either  by  fraud  or  violence. 
The  fact  however  is  apparent,  that  in  all  communities 
there  are  men,  who  are  not  disposed  to  respect  those 
laws,  but  will  utterly  disregard  and  violate  them,  unless 
restrained  by  force.  The  only  agency  which  can  effect- 
ually exercise  such  restraint  upon  the  lawless  is  govern- 
ment, acting  in  the  name  of  society,  and  able  to  com- 
mand the  whole  physical  force  of  the  community  to  exe- 
cute its  will.  In  the  performance  of  this  important 
function,  civil  government  becomes  quite  indispensable 
to  all  production  and  all  exchange.  It  may  be  regarded 
as  a  laborer  whose  services  can  nowhere  be  dispensed 
with,  like  a  watchman  that  guards  our  premises  by  night, 
and  this  service  it  cannot  perform,  any  more  than  any 
other  laborer,  unless  it  receives  its  appropriate  reward. 
And  yet  its  wages  are  not  determined  by  economic  laws. 
It  receives  whatever  it  demands.  In  some  cases  it  takes 
the  position  of  a  partner,  and  accepts  for  its  compensa- 
tion a  certain  per  centage  of  the  profits.  But  that  share 
of  the  profits  is  not  determined  by  agreement  between 
all  parties,  but  by  the  will  of  this  one  partner.  The  state 
furnishes  no  capital,  because  it  has  none  to  furnish,  but 
it  cannot  perform  its  function  unless  it  is  supported  by 
the  contributions  both  of  the  capitalists  and  the  laborers 
whom  it  protects. 

We  cannot  therefore  apply  to  the  consideration  of 
this  subject  those  economic  forces  with  which  we  have 
had  to  do  in  our  whole  previous  discussion.     As  econo- 


TAXATION.  297 

mists  we  have  really  nothing  to  do  with  taxation,  except 
to  point  out  those  functions  for  the  performance  of  which 
the  economies  of  society  are  necessarily  dependent  op 
the  state,  and  to  protest  against  the  assumption  on  the 
part  of  the  state  of  any  functions  which  do  not  legitimately 
belong  to  it.  The  first  duty  of  the  state  to  the  economic 
interests  of  society  we  have  already  indicated, — protec- 
tion of  every  citizen  in  the  enjoyment  of  all  his  personal 
rights, — protection  against  all  enemies  threatening  to 
assail  those  rights,  and  most  of  all  against  any  species 
of  tyranny  or  injustice  from  the  state  itself.  No  people 
can  be  prosperous  that  does  not  habitually  live  in  the 
conscious  security  which  the  ever-present  protection  of 
such  a  civil  state  affords.  There  must  be  an  assurance 
that  the  laws  are  just  and  will  be  justly  and  efficiently 
executed,  that  the  judiciary  is  pure,  enlightened  and 
righteous,  and  that  the  police  force  is  energetic  and  un- 
ceasingly vigilant.  Such  a  government  is  always  cheap 
at  what  it  necessarily  costs  to  sustain  it,  and  such  a  gov- 
ernment will  never  place  unnecessary  burdens  on  the 
people.  Exorbitant  and  unnecessary  exactions  always 
prove  that  the  government  itself  is  unfaithful  to  its  most 
essential  function. 

§  217.  It  is  sometimes  asserted,  rashly  and  thought- 
lessly we  think,  that  protection  of  person  and  property  is  the 
only  function  of  government.  It  is  certainly  not  true.  In 
addition  to  this  function  civil  government  must  be  the 
agent  of  society  for  providing  certain  conveniences  and 
comforts  which  are  necessary  to  all,  but  cannot  well  be 
provided  for  by  private  enterprise.  One  of  these  is  the 
postal  service,  by  which  intelligence  is  rapidly,  safely  and 
cheaply  conveyed  to  every  part  of  a  great  nation.  In- 
deed under  the  present  peaceful  relations  of  the  nations 
to  each  other,  and  those  improved  international  postal 
arrangements  which  modern  statesmanship  has  devised, 

13* 


298  ECONOMICS. 

it  provides  for  cheap  and  rapid  communication  between 
any  one  individual  in  the  civilized  world  however  hum- 
ble he  may  be,  and  any  other.  Every  little  post-office 
in  Christendom  is  in  easy  and  certain  communication 
with  every  other.  Nor  is  this  limited  to  Christendom. 
The  present  postal  system  of  the  world  is  as  cosmopolitan 
as  our  science  itself.  It  is  a  grand  practical  recognition 
of  universal  fraternity,  and  a  striking  illustration  of  the 
vastness  of  the  benefits  which  enlightened  governments 
at  peace  with  one  another  can  confer  on  mankind.  The 
benefits  which  it  confers  on  the  economic  interests  of 
society  are  simply  incalculable.  It  renders  the  negotia- 
tion of  exchanges  not  only  possible  but  easy  and  cheap, 
between  any  two  individuals  dwelling  in  any  portion  of 
the  civilized  world. 

The  expense  however  of  sustaining  this  magnificent 
system  should  not  fall  either  in  whole  or  in  part  on  the 
taxpayer.  It  should  be  and  may  be  self-supporting. 
That  nation  whose  postal  service  is  a  burden  upon  the 
general  revenue  may  well  be  suspected  of  a  lack  of  states- 
manship. 

Another  very  important  service  which  the  govern- 
ment renders  to  the  economic  interests  of  society  is  the 
construction  of  the  great  thoroughfares  of  the  country^  and 
the  roads  by  which  every  man  cofnmunicates  with  every 
other.  This  also  includes  the  care  and  improvement  of 
the  streets  of  cities  and  the  numerous  arrangements  which 
are  necessary  for  the  health,  comfort,  convenience  and 
safety  of  their  inhabitants.  It  is  not  possible  to  point 
out  any  agency  by  which  these  necessary  arrangements 
could  well  be  provided,  except  that  of  the  government. 
In  such  a  system  of  government  as  ours,  all  these  wants, 
except  the  construction  of  great  national  thoroughfares, 
should  be  provided  for  by  local  taxation.  Each  local 
community  should  in  these  respects  take  care  of  itself 


TAXATION.  299 

It  is  also  worthy  of  very  serious  consideration,  whether 
the  resources  necessary  for  such  objects  of  local  improve- 
ment should  not  be  raised  and  appropriated  by  the  votes 
of  taxpayers  only.  Excessive  municipal  taxation  is  at 
the  present  time  one  of  the  greatest  burdens  of  the 
American  taxpayer,  and  we  will  add  one  of  the  greatest 
dangers  of  the  future.  The  rights  of  property  cannot  be 
safe  in  any  country,  where  men  who  pay  no  taxes  and 
bear  none  of  the  burdens  of  society  have  an  unlimited 
power  of  imposing  taxes  for  other  men  to  pay,  and  where 
the  hope  of  obtaining  a  profitable  job  from  the  public 
will  induce  multitudes  of  men  who  perhaps  never  paid  a 
tax  in  their  lives,  to  vote  for  some  costly  public  work, 
without  any  proper  consideration  of  its  utility  or  impor- 
tance, and  quite  regardless  how  inconvenient  and  oppres- 
sive may  be  the  burdens  which  it  will  impose  on  the  tax- 
payers. If  we  are  told  that  under  our  system  there  is  no 
remedy  for  such  an  evil  as  this,  our  answer  is,  that  only 
shows  that  the  system  greatly  needs  reforming.  We 
believe  in  liberty,  but  liberty  which  works  constant  injus- 
tice will  not  be  of  long  continuance.  Men  who  pay  nc 
taxes  are  not  well  qualified  to  impose  taxes  on  those 
who  do. 

§  218.  We  have  already  explained  the  necessity  of  pro- 
viding at  the  expense  of  the  state  certain  opportunities  of  edu- 
cation to  all  the  people.  In  so  far  as  this  has  not  been 
sufficiently  provided  for  by  the  munificent  school  funds 
which  many  of  the  states  received  from  the  general  gov- 
ernment, or  other  funds  for  school  purposes  which  the 
states  may  have  acquired,  the  means  necessary  must  also 
be  raised  by  taxation.  Under  our  system  they  should  be 
raised  by  local  taxes.  To  what  extent  of  costliness  pub- 
lic education  at  the  expense  of  the  state  should  be  carried, 
it  is  not  within  our  province  here  to  inquire.  It  is  proper 
however  to  lay  down  a  principle  which,  if  we  are  right  in 


300  ECONOMICS. 

the  conclusions  to  which  we  have  come  in  the  course  of 
this  treatise,  must  be  fundamental  to  the  whole  subject 
That  principle  is,  that  the  only  reason  why  provisions  for 
gratuitous  education  should  be  made  at  all  at  the  expense 
of  the  state,  is  that  the  health  and  safety  of  society  re- 
quire it.  It  is  a  reason  of  the  same  kind  as  that  which 
justifies  and  requires  such  police  regulations  as  are 
necessary  for  the  prevention  or  removal  of  local  nui- 
sances dangerous  to  the  health  of  the  community.  It  is 
to  prevent  the  growth  upon  the  body  politic  of  cancerous 
tumors  and  fatal  gangrene.  The  doctrine  that  it  is  the 
duty  of  the  state  to  provide  gratuitously  for  every  child 
of  every  resident  on  the  soil  the  means  of  an  accom- 
plished education  in  every  department  of  literature  and 
science,  rests  on  no  better  foundation  than  the  doctrine 
that  the  state  is  bound  to  furnish  employment  for  all  un- 
employed laborers,  or  to  render  the  ornaments  of  dress 
equally  accessible  to  all  men  whether  rich  or  poor.  Aside 
from  what  is  necessary  for  the  safety  and  health  of  the 
community,  the  state  is  under  no  more  obligation,  and 
has  no  more  right,  to  undertake  the  education  of  every 
man's  children,  than  to  feed  and  clothe  and  house  them. 
The  same  fundamental  law  which  makes  a  man  the 
owner  of  all  which  he  produces  by  his  labor,  also  throws 
upon  him  the  burden  of  supporting  himself,  and  that 
family  to  which  he  gives  existence  by  his  own  voluntary 
act,  and  the  support  of  a  family  includes  education,  as 
truly  as  food  and  clothing  and  shelter.  The  more  we 
scrutinize  the  phenomena  of  human  society,  the  more 
apparent  it  will  become,  that  the  family  and  not  the  in- 
dividual is  the  constituent  unit. 

It  may  perhaps  be  urged,  that  the  well-being  of  society 
requires  that  facilities  should  be  furnished  at  the  expense 
of  the  state  for  the  complete  education  of  all  the  people. 
If  this  were  granted,  it  would  not  hence  follow,  that  the 


TAXATION.  301 

benefit  derived  to  society  from  such  an  arrangement 
would  justify  the  cost  of  it.  It  might  be  a  fine  thing  for 
the  community,  that  every  man  should  have  a  railway 
station  directly  in  front  of  his  own  door,  but  the  levying 
of  a  tax  sufficient  to  accomplish  it,  would  be  the  confis- 
cation of  all  property.  The  same  would  be  true  to  no 
small  extent  of  the  attempt  to  provide  for  the  gratuitous 
education  of  the  entire  people  by  taxation,  provided  that 
education  was  extended  to  the  whole  circle  of  literature 
and  science.  Nothing  can  realize  that  conception  of 
public  education  which  is  entertained  by  many  minds, 
and  is  deeply  affecting  our  school  legislation,  short  of  a 
severity  of  taxation  which  will  be  found  insupportable  to 
the  taxpayer.  There  may  be  good  things  which  a 
householder  cannot  afford  to  provide  for  his  family,  and 
so  there  may  be  good  things  which  the  state  cannot  afford 
to  provide  for  the  people,  because  it  will  cost  more  than 
the  people  can  afford  to  pay. 

It  has  however  never  been  proved  that  a  provision  for 
the  universal  gratuitous  education  of  the  people  would  be 
be7iefLcial  to  society.  It  is  a  question  which  lies  quite  out- 
side of  our  science,  and  we  cannot  therefore  permit  our- 
selves to  enter  on  the  discussion  of  it  here.  We  can 
only  state  it,  and  leave  the  discussion  of  it  to  others. 
Can  it  be  shown  that  the  constitution  of  the  state  is  such 
as  to  qualify  it  to  devise  and  carry  into  execution  a  com- 
plete system  of  education  for  all  the  people  ?  Does  any 
sane  man  believe  that  it  would  be  wise  and  safe  to  en- 
trust that  entire  interest  to  political  bodies  and  political 
action  ?  If  not,  then  surely  it  is  time  for  thoughtful  men 
to  begin  to  search  in  earnest  for  the  limit,  beyond  which 
state  provision  for  the  education  of  the  people  ought  not 
to  go,  and  at  which  the  burden  ought  to  be  thrown  upon 
individual  parents,  of  educating  their  own  children.  The 
whole  subject  is  left  in  the  recent  legislation  of  the  ooun- 


302  ECONOMICS. 

try  at  loose  ends,  and  no  limit  can  be  discerned  to  the 
burdens  which  are  liable  to  be  thrown  upon  the  taxpayer 
in  the  interest  of  gratuitous  education.  The  subject  re- 
quires, not  popular  declamation,  of  that  we  have  had  too 
much  already,  but  discrimination,  definition,  thoughtful 
statesmanship.  We  are  convinced  that  to  a  certain  ex- 
tent gratuitous  education  ought  to  be  provided  for  the 
people  at  the  expense  of  the  taxpayer.  But  there  is  a 
limit  beyond  which  it  is  not  possible  to  carry  that  pro- 
vision, without  ruinously  severe  taxation,  and  beyond 
which  the  interests  of  education  are  much  more  wisely 
left  to  the  fathers  and  mothers  of  the  nation,  than  con- 
trolled by  the  state.  The  time  has  fully  come  when  this 
limit  ought  to  be  determined  by  wise,  sound  statesman- 
ship, and  legislation  be  made  to  conform  to  it. 

It  is  surely  not  difficult  to  see  that  the  principle 
which  we  asserted  in  respect  to  taxation  for  local  im- 
provements equally  holds  here.  A  greater  injustice  can 
hardly  be  conceived  of,  than  that  men  who  pay  no  taxes 
should  have  unlimited  power  to  vote  taxes  upon  all  the 
property  around  them  to  educate  their  own  children. 
The  men  who  pay  the  taxes  should  surely  have  the  right 
of  deciding  by  their  own  votes,  how  much  shall  be  ap- 
propriated to  the  gratuitous  education  of  the  whole  com- 
munity. To  deny  them  that  right,  is,  so  far  as  it  goes, 
to  take  the  disposal  of  their  property  out  of  their  hands 
and  commit  it  to  the  hands  of  others  who  have  no  inter- 
est in  it,  except  to  obtain  as  much  as  possible  of  it  for 
their  own  uses.  This  cannot  be  a  sound  and  righteous 
system  of  taxation,  and  if  persisted  in  it  will  sooner  or 
later  result  in  disaster. 

§  219.  Provisions  for  the  care  of  the  unfortunate  con- 
stitute another  important  part  of  American  taxation.  We 
cannot  conceive  that  a  government  representing  a  Chris- 
tian people  can  fail  to  make  some  provisions  for  the 


TAXATION.  303 

education  of  the  deaf  and  dumb,  the  blind,  and  the  fee- 
ble-minded, and  for  the  care  of  the  insane.  The  only 
questions  which  can  be  raised  with  reference  to  such 
provisions  must  respect  the  scale  of  costliness  upon 
which  they  shall  be  constructed,  and  whether  the  bene- 
fits of  them  should  be  given  to  all  gratuitously.  It  is 
evident  that  if  such  interests  are  provided  for  with  un- 
thinking prodigality,  considering  only  what  is  desirable, 
and  not  at  all  what  burdens  may  be  thrown  upon  the 
taxpayer,  it  is  quite  possible  that  these  provisions  may 
become  far  more  costly  than  the  real  necessities  of  the 
case  require,  more  costly  too  than  a  regard  for  the  well- 
being  of  these  unfortunates  demands  or  permits.  Such 
provisions  should  certainly  be  made  in  a  spirit  of  gen- 
erous liberality,  but  not  without  the  frugality  of  the  true 
statesman,  who  will  incur  no  greater  cost  than  is  neces- 
sary to  accomplish  the  substantial  ends  at  which  he 
aims.  That  there  has  been  much  of  this  statesman-like 
frugality  of  late  in  our  outlays  for  public  charity,  we 
think  will  hardly  be  pretended.  If  burdensome  taxa- 
tion is  an  evil  at  the  present  time,  this  subject  will  bear 
examination. 

Provisions  for  the  care  of  the  unfortunate  must  neces- 
sarily be  to  a  certain  extent  gratuitous^  otherwise  the  poor 
to  whom  they  are  especially  important  would  not  be  able 
to  enjoy  the  benefit  of  them.  But  it  is  impossible  for  us 
to  conceive  of  any  good  reason  why  the  state  should  as- 
sume the  entire  burden  of  the  education  and  care  of  all 
these  unfortunates,  however  affluent  their  condition  may 
be.  The  burden  upon  the  taxpayer  would  be  greatly 
relieved,  if  all  persons  in  affluent  circumstances  were  re- 
quired to  make  fair  compensation  for  the  benefits  which 
they  receive  from  these  institutions,  and  we  believe  such 
persons  would  prefer  to  pay  the  full  value  of  the  service 
rendered  them,  rather  than  to  receive  it  as  a  gratuity 


304  ECONOMICS. 

Under  the  present  tendency  to  burdensome  taxation  of 
which  all  taxpayers  are  sensible,  the  state  ought  to  study 
every  honorable  method  of  diminishing  the  burden  as 
much  as  possible.  Of  taxation  for  the  relief  of  the  poor 
we  shall  speak  in  a  chapter  especially  devoted  to  that 
subject. 

§  220.  There  is  one  claim  of  the  government  not  only 
upon  the  capital  but  upon  the  labor  and  the  life  of  the 
citizen,  which  is  in  the  nature  of  the  case  unlimited.  A 
government  which  is  the  defender  of  the  peace  of  society 
and  of  all  the  rights  of  the  citizens,  not  only  has  the  right 
but  is  bound  in  duty  to  protect  its  own  existence,  and  its 
power  to  perform  its  proper  function,  against  any  enemy 
that  may  assail  it.  When  thus  assailed,  the  government 
may  claim  the  property  and  the  personal  service  of  every 
citizen,  to  whatever  extent  and  at  whatever  hazard  may 
be  needful  for  its  own  preservation.  To  preserve  the 
life  of  society  is  more  important  than  any  individual  per- 
son or  private  interest  can  be,  and  the  less  must  give 
way  to  the  greater.  On  this  principle  only  can  national 
existence  be  preserved  and  prolonged. 

When  a  nation  has  incurred  obligations  however 
great  in  such  a  struggle  for  self-preservation,  those  obli- 
gations are  to  be  regarded  as  a  mortgage  on  the  entire 
labor  and  capital  of  the  nation,  from  which  they  can 
never  be  released,  except  by  the  full  performance  of  all 
the  promises  which  the  government  has  made.  National 
indebtedness  binds  the  conscience  of  an  entire  people. 
Nations  should  be  very  cautious  of  incurring  such  obli- 
gations unnecessarily,  and  scrupulously  faithful  in  their 
performance. 

§  221.  There  are  some  uses  to  which  the  tax-levying 
power  is  often  applied,  against  which  it  is  the  duty  of  the 
economist  to  enter  his  protest.  That  power  should  nevef 
be  used  for  the  purpose  of  diverting  either  capital  or  labor 


TAXATION.  305 

from  those  modes  of  employment  to  which  they  would  resort 
if  left  to  themselves,  A  legislature  is  destitute  of  nearly- 
all  those  qualifications  which  are  necessary  to  fit  it  for 
judging  in  what  way  capital  ought  to  be  invested,  in 
order  to  be  most  profitable  to  the  community.  Bring 
such  a  question  as  this  before  an  American  Congress  for 
decision,  and  there  is  not  one  chance  in  a  hundred  that 
it  will  be  decided  correctly.  The  members  are  not  prac- 
tically acquainted  with  the  real  elements  of  the  question. 
They  do  not  view  it  from  the  stand-point  of  the  man  who 
is  about  to  lay  out  his  own  labor,  or  invest  his  own  capi- 
tal. They  will  be  open  to  the  influence  of  any  man  who 
may  approach  them  for  the  purpose  of  accomplishing  his 
own  selfish  purposes.  Many  political  considerations 
which  are  quite  irrelevant  to  the  case  will  influence  their 
minds  and  their  votes.  To  draw  a  correct  decision  of 
the  question  out  of  the  midst  of  such  influences  is  seem- 
ingly impossible.  Yet  these  men  after  such  a  delibera- 
tion come  to  the  conclusion  that  American  capital  is  too 
largely  invested  in  some  one  branch  of  industry,  and 
ought  to  be  withdrawn  from  it,  and  invested  in  some 
other,  in  which  these  sages  have  been  made  to  believe 
that  more  of  it  should  be  employed.  They  immediately 
look  around  themselves  for  the  means  of  accomplishing 
what  they  think  desirable.  The  power  of  taxation  is 
chosen  as  the  instrument,  and  a  heavy  tax  is  imposed  on 
all  those  who  use  certain  foreign  products,  not  for  the 
legitimate  purpose  of  taxation,  to  bring  revenue  into  the 
national  treasury,  but  only  for  the  purpose  of  compelling 
labor  and  capital  to  leave  one  mode  of  investment  in 
which  they  are  profitably  employed,  and  seek  another  in 
which  our  legislators  think  it  would  be  better  that  they 
should  be  invested.  This  is  a  two-fold  abuse  ;  it  is  the 
exercise  of  the  legislative  function  for  a  purpose  for  which 
it  was  never  intended,  and  is  quite  unfitted ;  and  it  is  ap 


3<^6  ECONOMICS. 

plying  the  power  of  the  legislature  to  impose  taxes  to  an 
end  quite  foreign  to  its  legitimate  uses.  The  power  of 
taxation  is  frequently  used  for  the  purpose  of  discounte- 
nancing  modes  of  using  capital  which  are  regarded  as 
immoral  or  injurious  to  society.  The  propriety  of  such 
a  use  of  it  involves  moral  and  religious  questions  which, 
though  very  interesting  and  important,  cannot  be  appro- 
priately discussed  in  this  treatise.  But  the  cases  of  which 
we  are  speaking  are  not  of  this  sort.  Both  the  mode  of 
employing  capital  which  is  encouraged,  and  that  which 
is  discouraged,  are  admitted  to  be  legitimate  and  proper, 
and  conducive  to  the  general  good ;  and  the  legislator 
assumes  to  encourage  the  one  and  discourage  the  other  in 
the  comparison,  because  he  claims  in  his  capacity  of 
legislator  to  be  a  better  judge  how  capital  ought  to  be 
invested  than  the  capitalist  does,  and  uses  his  power  of 
levying  taxes  to  compel  such  a  use  of  capital  as  he  judges 
best.  This  is  a  usurpation.  The  fit  reply  of  the  capi- 
talist to  such  intermeddling  of  the  legislator  is, — that,  sir, 
is  none  of  your  business  ;  I  am  a  better  judge  of  it  than 
you  are. 

§  2  22.  This  introduces  the  consideration  of  the  mode 
of  taxation, — a  subject  which  lies  outside  the  limits  of 
our  science,  and  of  which  we  had  therefore  purposed  to 
say  nothing.  But  more  reflection  has  convinced  us,  that 
it  so  nearly  concerns  the  subject  matter  of  which  we  must 
treat,  that  its  consideration  cannot  be  entirely  omitted. 
Our  views  of  imposts  levied  for  the  purpose  of  fostering 
certain  industries,  by  protecting  them  from  foreign  com- 
petition, have  been  freely  given.  But  our  science  enters 
no  protest  against  i^nposts  levied  for  the  purpose  of  raising 
?iecessary  revenue.  It  cannot  be  denied,  that  that  mode 
of  taxation  is  recommended  to  the  legislator  by  many 
important  advantages.  But  instead  of  being  in  his 
hands  a  fit  instrument  to  be  employed  in  diverting  trade 


TAXATION.  307 

• 

from  channels  in  which  it  tends  to  run,  into  others 
which  he  regards  with  more  favor,  the  greatest  objection 
against  the  use  of  it  lies  in  its  liability  to  oxert  such  an 
influence. 

Let  us  suppose,  for  example,  that  a  duty  is  imposed 
for  the  purpose  of  revenue  only,  on  some  commodity, 
the  supply  of  which  is  partly  produced  at  home,  and 
partly  imported.  A  duty  levied  on  the  importation  of 
that  commodity  must,  to  all  appearance,  raise  the  price 
of  that  portion  of  the  supply  which  is  produced  at  home, 
and  give  a  relative  advantage  to  those  engaged  in  that 
industry,  to  which  they  are  in  no  way  entitled.  No  true 
statesman,  seeking  revenue  only,  would  sanction  such  an 
impost.  He  would  either  levy  imposts  upon  commodi- 
ties that  are  not  and  cannot  be  produced  at  home,  or  he 
would  balance  the  foreign  imposts  by  a  precisely  equiva- 
lent internal  tax  on  the  home  production,  so  that  the 
home  and  foreign  product  would  meet  on  terms  of  equal 
competition  in  the  home  market  as  before.  Otherwise 
the  price  of  the  commodity  would  be  raised  to  the  con- 
sumer by  the  whole  amount  of  the  duty,  and  yet,  so  far 
as  the  supply  was  produced  at  home,  the  producer  and 
not  the  public  revenue  would  receive  the  benefit  of  it. 
In  the  free  trade  system  of  England,  this  point  is  care- 
fully guarded.  Her  policy  is  to  raise  her  revenue  from 
commodities  not  produced  at  home. 

It  may  be  objected  to  this,  that  it  would  often  bring 
the  burden  of  taxation  on  the  poor  as  well  as  on  the 
rich  ;  since,  for  example,  such  articles  as  tea  and  coffee 
must  be  taxed,  because  they  are  not  produced  at  home. 
To  this  we  reply,  first,  that  these  are  luxuries  rather  than 
necessaries  of  life,  and  therefore  very  properly  subject  to 
taxation ;  and  second,  that  the  most  efiicient  revenue 
duty  is  shown  by  experience  to  be  a  low  rather  than  a 
high  one.     The  tax  which  it  would  be  necessary  to  levy 


3o3  ECONOMICS. 

on  those  articles  would  be  so  low  a  percentage,  that  its 
effect  on  a  pound  of  tea  or  coffee  would  be  but  barely 
perceptible,  and  could  not  be  a  ground  of  just  complaint. 
A  demagogue  might  be  disposed  to  magnify  it,  but  a 
statesman  would  hardly  regard  it  as  a  matter  of  serious 
importance.  In  a  country  where  the  vote  of  a  poor  man 
is  just  as  weighty  as  that  of  a  rich  man,  a  small  tax  on 
an  article  of  luxury,  which  presses  with  absolute  impar- 
tiality on  every  voter,  should  never  be  complained  of. 
A  man  who  cannot  pay  a  tax  of  five  to  ten  cents  per 
pound,  on  the  few  pounds  of  tea  and  coffee  which  any 
poor  man  would  use  in  a  year,  can  hardly  be  fit  for  a 
voter.  No  man  of  any  spirit,  whether  rich  or  poor,  would 
permit  such  a  plea  to  be  made  in  his  behalf 

§  223.  The  question  is  much  agitated  at  present,  07i 
what  forms  of  property  taxes  may  be  properly  levied.  One 
of  the  most  important  points  in  this  discussion  relates  to 
the  adjustment  of  tax  levies,  in  respect  to  debtors  and 
creditors.  A  definition  of  property  has  been  proposed, 
according  to  which  debts  due  any  one  are  not  property, 
and  are  therefore  not  taxable.  All  property,  it  is  claimed, 
has  materiality  and  a  local  situation.  Debts  due  to  any 
one  have  neither,  and  are  therefore  not  property.  The 
reader  need  not  be  told,  that  we  cannot  accept  this  defi- 
nition. According  to  our  definition  of  wealth,  skill  and 
power  to  labor  are  property.  Yet  they  have  no  material- 
ity. An  invention  is  a  mere  conception  of  the  mind, 
yet  it  is  property.  But  in  the  case  under  consideration, 
the  definition  of  property  proposed,  even  if  admitted, 
would  not  avail.  A  man  may  be  to-day  the  owner  of 
one  hundred  thousand  dollars  in  gold.  To-morrow  he 
may  lend  it,  and  receive  for  it  real  estate  security.  He 
has  not  by  that  transaction  divested  himself  of  all  his 
property,  or  of  any  of  it.  Indeed  it  matters  not  whether 
he  has  taken  security  on  real  estate,  or  relied  on  the  bare 


•iaXATion.  30^ 

credit  of  the  borrower.  The  moment  that  loan  is  made, 
he  owns  the  property  of  the  borrower  to  the  amount  of 
one  hundred  thousand  dollars.  The  evidence  of  indebt- 
edness which  he  holds  is  the  proof  of  his  right  to  such 
an  interest  in  the  property  of  the  borrower.  It  is  his 
title  deed.  The  borrower  may  use  the  gold  as  he  pleases, 
but  the  creditor  is  the  owner  of  that  amount  of  property 
which  is  in  the  present  possession  of  the  borrower. 

The  question  is  certainly  a  fair  one,  how  the  transac- 
Hon  as  thus  described^  should  affect  the  two  parties^  in  re- 
spect to  their  liabiliiies  to  taxation.  By  the  laws  of  some 
of  the  states,  the  tax  assessor  disregards  this  transaction 
entirely.  He  estimates  the  property  of  the  debtor  just 
as  if  the  debt  did  not  exist,  and  the  property  of  the 
creditor  as  though  the  gold  was  still  in  his  hands.  It  is 
only  necessary  thus  to  state  the  case,  to  convince  any 
candid  mind  of  the  unreasonableness  of  the  law.  That 
item  of  one  hundred  thousand  dollars  is  doubled  in  the 
assessment  and  twice  taxed.  A  state  that  makes  out  its 
tax  lists  on  that  principle  estimates  the  property  of  the 
people  of  the  state  at  an  amount  immensely  greater  than 
it  is  in  truth.  Such  an  assessment  is  a  delusion,  and  a 
tax  levied  on  it  is  a  public  oppression.  It  would  be  easy 
to  show  that,  if  taxes  are  assessed  on  this  principle,  the 
same  property  is  not  only  liable,  as  in  the  case  above 
given,  to  be  reckoned  twice  over,  but  to  be  repeated  any 
number  of  times.  It  is  wonderful  that  any  legislator 
should  fail  to  notice  the  bald  injustice  of  such  a  system 
of  taxation.  Nothing  can  be  plainer  than  that  the  same 
property  should  be  taxed  but  once. 

§  224.  The  question  will  rise  whether  the  debtor  or  the 
creditor  should  pay  the  tax.  The  answer  cannot  be  difficult. 
Who  is  the  real  owner  of  the  property  in  question  ?  No 
one  can  be  at  a  loss  for  an  answer.  The  property  of  the 
debtor  is  the  amount  of  all  which  stands  in  his  name 


3IO  ECONOMICS. 

minus  the  debt.  The  property  of  the  creditor,  in  the 
case  supposed,  is  one  hundred  thousand  dollars,  the 
amount  of  the  debt  due  him.  Then  let  each  of  the  par- 
ties be  taxed  for  the  property  he  really  owns.  Let  the 
amount  of  the  debt  be  subtracted  from  the  property  of 
the  debtor,  and  assessed  to  the  creditor.  No  injustice 
will  then  be  done  to  either  party.  An  assessment  con- 
ducted on  that  principle  would  give  the  nearest  possible 
approximation  to  the  real  value  of  the  property  of  the 
people,  and  a  tax  levied  upon  it  would  be  as  near  an  ap- 
proach to  equity  as  is  attainable. 

In  case  of  a  debtor  and  creditor  residing  in  different 
states^  the  question  would  arise  in  which  state  the  tax 
should  be  paid.  A  very  clear  and  simple  principle 
seems  to  be  at  hand  to  settle  this  question.  All  capi- 
tal should  contribute  to  the  support  of  the  government 
that  protects  it.  Property  should  therefore  be  taxed  in 
the  state,  to  the  courts  of  which  its  owner  would  resort, 
to  enforce  his  rights.  A  mortgage  must  be  foreclosed 
in  the  ^courts  of  the  state  in  which  the  mortgaged  prop- 
erty is  situated.  To  that  state  therefore  the  creditor 
should  pay  taxes,  no  matter  where  he  himself  resides. 
The  same  principle  will  hold,  when  no  real  estate  security 
is  given.  The  creditor  should  still  pay  the  tax  to  the 
state  in  which  he  is  to  bring  suit,  to  enforce  his  rights. 

The  construction  of  a  system  of  taxation  on  these 
principles  would  gve2it\y  facilitate  the  discovery  of  all  prop- 
erty rightfully  subject  to  taxation.  If  the  person  in  whose 
name  any  taxable  property  stands,  is  required  to  make 
an  exhibit  of  his  property,  he  will  of  course,  for  his  own 
protection,  make  known  any  indebtedness  which  can  be 
offset  to  it.  Let  him  also  be  required  to  give  the  credi- 
tor's name  and  residence.  Let  the  neglect  of  the  credi- 
tor to  pay  the  tax,  work  a  forfeiture  of  his  claim  against 
the  debtor;  in  which  case,  the   debtor   being  released 


TAXATION.  .  311 

from  his  obligation  to  pay  the  debt  shall  become  liable 
for  the  tax.  The  effect  of  such  a  law  would  doubt- 
less be,  that  in  the  original  contract  for  the  loan,  the 
debtor  would  agree  to  pay  the  tax,  as  a  part  of  the  con- 
sideration for  the  use  of  the  money.  In  such  a  case  the 
property  of  the  borrower  would  be  estimated  without 
reference  to  the  debt,  and  the  creditor  would  be  unknown 
in  the  assessment,  and  would  simply  receive  a  lower  rate 
of  interest  on  account  of  his  exemption  from  taxation. 
This  arrangement,  so  perfectly  equitable  between  the 
parties,  would  secure  to  the  state  precisely  the  amount 
of  revenue  to  which  it  was  entitled.  For  such  a  debt, 
the  creditor  should  of  course  not  be  taxed  in  the  state  in 
which  he  resided.  The  adoption  of  these  principles  of 
taxation  in  all  the  states,  would  greatly  facilitate  the  free 
movement  of  capital  over  our  whole  country,  according 
to  the  law  of  supply  and  demand.  It  would  secure 
equity  everywhere,  and  work  injustice  no  where. 

§  225.  It  needs  no  argument  to  prove  that  the  rapid 
increase  of  taxation  for  purposes  of  local  improvement, 
gratuitous  education  and  charitable  provisions  for  the 
unfortunate  is  one  of  the  great  dangers  which  threaten  the 
future  of  our  country.  The  entire  amount  of  taxation 
borne  by  the  citizens  of  many  of  our  towns  and  cities, 
exclusive  of  all  charges  levied  by  the  federal  government, 
ranges  from  three  and  a  half  to  seven  per  cent  on  an  as- 
sessment of  property  at  its  cash  valuation,  and  that  at  a 
time  when  the  current  rate  of  interest  cannot  be  said  to 
exceed  eight  per  cent  per  annum.  It  surely  needs  no  argu- 
ment to  prove,  that  such  taxation  must  be  very  oppressive 
to  the  industries  of  the  country,  and  a  great  obstacle  to 
the  accumulation  of  capital,  especially  when  it  is  farther 
considered,  that  to  the  figures  given  above  must  be  added 
all  the  charges  of  supporting  the  federal  government, 
and  for  paying  interest  and  principal  of  the  national  debt 


312  ECONOMICS. 

If  any  one  thinks  there  is  nothing  burdensome  and  alarm 
ing  in  such  taxation  as  this,  we  must  be  excused  from 
believing  that  he  is  either  a  financier  or  a  statesman. 
Such  burdens  laid  year  after  year  on  the  industry  of  the 
country  do  not  indicate  statesmanship,  but  recklessness 
such  as  disqualifies  one  for  any  position  of  public  trust. 
These  are  plain  spoken  words,  but  the  gravity  of  the  case 
requires  it. 


CHAPTER  XV. 
Pauperism. 


§  226.  There  is  no  logical  place  in  the  science  of  econom- 
ics for  such  an  anomaly  as  pauperism.  That  sciei>ce 
has  to  do  with  a  society  made  up  of  units,  each  one  of 
which  is  a  personality  endowed  on  the  one  hand  with 
power  to  labor,  and  capable  on  the  other  of  supporting 
itself  by  its  own  labor.  Each  one  is  expected  to  be, 
not  only  self-supporting,  but  to  be  capable  of  adding 
something  to  that  great  human  patrimony,  which  is  con- 
stantly being  acccumulated  for  the  benefit  of  all.  In 
each  of  these  units  may  be  embraced  all  the  individuals 
of  a  family.  There  may  be  a  mother  whose  entire  power 
to  labor  is  absorbed  in  the  care  of  children.  There  may 
be  children  who  will  not  yet  for  many  years  be  able  to 
bear  the  burdens  of  the  laborer,  or  adequate  for  self- 
support.  There  may  be  decrepid  age  whose  task  is  al- 
ready done.  There  may  be  the  invalid  whom  disease 
has  prematurely  disqualified  for  labor.  But  the  unit  is 
the  family,  and  that  unit  with  all  embraced  in  it  is  ex- 
pected to  be  self-supporting,  and  if  possible  accumulat- 


PAUPERISM.  313 

ing.  "  If  any  one  will  not  work  neither  shall  he  eat,"  is 
sound  economy  and  sound  morality. 

But  this  theoretic  economic  world  is  not  in  all  respects 
the  real  world  in  which  we  live.  There  are  frictions  in 
the  workings  of  our  economic  machinery,  which  we  must 
not  refuse  to  consider.  Some  are  never  endowed  with 
powers  of  self-sustentation.  Others  are  deprived  of 
those  powers  by  disease  or  by  the  inevitable  providence 
of  God.  Others  through  sheer  indolence  refuse  to  work 
that  they  may  eat.  Others  still  are  disqualified  for  self- 
support  by  their  vices,  or  are  deprived  of  the  means  of 
subsistence  by  the  indolence  and  vices  of  their  natural 
supporters  and  protectors.  Any  of  these  cases  of  disa- 
bility are  liable  to  occur  in  respect  to  persons  who  are 
not  embraced  in  any  self-supporting  unit,  and  are  there- 
fore entirely  unprovided  for. 

Over  and  above  all  this,  it  has  been  true  in  all  the 
past  history  of  the  human  race,  that  in  the  progress  of 
society  in  wealth  and  population,  large  numbers  of  men 
have  fallen  out  of  the  current  of  general  prosperity,  and 
spent  their  lives  on  the  very  verge  of  starvation.  No 
civilization  has  ever  existed  for  any  considerable  length 
of  time,  which  had  not  a  lower  stratum  of  extreme  pov- 
erty and  wretchedness.  Perhaps  nowhere  in  the  world's 
history  has  this  phenomenon  put  on  more  shocking  and 
revolting  aspects,  than  in  some  of  the  most  cultivated 
and  w^ealthy  modern  nations.  To  this  hour  we  are  pro- 
vided with  no  effectual  antidote  or  remedy  for  this  dis- 
ease of  the  body  politic. 

§  2  2  7.  W/iaf  then  shall  be  doJiefor  these  masses  or  with 
them?  As  economists  we  cannot  refuse  to  consider  this 
question.  We  have  pointed  out  the  laws  by  which  am- 
ple supplies  of  human  want  are  created,  exchanged  and 
distributed.  But  here  are  vast  masses  belonging  to  our 
common  humanity^,  that  perform  no  such  service  in  the 
14 


314  ECONOMICS. 

creation  of  wealth  as  would  give  them  an  available  claim 
to  a  share  in  the  distribution.  Is  there  no  possible  re- 
adjustment of  economic  laws,  by  which  these  wants  may 
be  supplied  ?  Must  not  our  laws  of  distribution  be  made 
in  some  way  to  bend,  or  relax  their  tension,  so  as  to  give 
bread  to  these  hungry  mouths  ?  All  agree  in  maintain- 
ing that  the  bounties  of  the  Creator  are  intended  im- 
partially for  all,  and  that  the  system  should  be  so  con- 
structed as  to  give  to  all  a  fair  opportunity  to  supply 
their  wants  by  their  own  labor.  All  would  equally  agree 
that  it  is  the  province  not  only  of  Christian  charity,  but 
of  humanity,  to  supply  the  wants  of  all  those  who  are  in- 
capacitated to  labor,  either  by  natural  imbecility  or 
inevitable  calamity.  All  these  cases  are  easily  disposed 
of,  not  only  in  theory  but  in  practice.  If  the  sufferings 
of  the  poor  could  be  confined  within  the  limits  which  we 
have  just  defined,  the  humane  impulses  which  are  native 
to  the  human  heart,  and  still  more  the  charity  which  is 
deeply  imbedded  in  the  very  foundations  of  our  religion, 
would  be  entirely  adequate  to  provide  for  every  exigency 
of  the  case,  without  any  interference  either  of  the  econ- 
omist or  the  legislator.  But  when  all  these  cases  have 
been  provided  for,  there  still  remains  a  vast  amount  of 
uncomforted  and  unmitigated  wretchedness.  What  shall 
be  done  with  and  for  it? 

§  228.  At  this  point  it  seems  to  us  the  question  should 
first  be  referred  to  the  consideration  of  the  Christian^  the  mor- 
alist  and  the  statesman.  We  have  already  indicated  the 
economic  causes,  which  we  think  tend  to  increase  and 
perpetuate  these  evils,  and  earnestly  insisted  on  the 
necessity  of  their  entire  removal.  We  have  insisted  on 
such  a  construction  of  all  our  economic  machinery  as 
will  give  to  every  man  a  fair  chance  in  the  race  of  life. 
Our  science  can  do  no  more.  Are  there  misadjusted 
moral  forces,  are  there  social  customs  and  arrangements 


PAUPERISM.  315 

which  increase  the  temptations  to  vice  and  multiply  the 
number  of  its  victims?  Can  any  change  in  our  laws  and 
police  regulations  remove  dangerous  temptations  out  of 
the  way  of  the  young  and  the  unwary?  Are  our  towns 
and  cities  collecting  revenue  from  branches  of  traffic 
which  deprave  the  morals  and  waste  the  substance  of  the 
people,  and  which  therefore  ought  to  be  utterly  prohib- 
ited instead  of  being  made  sources  of  revenue  ?  Is  there 
any  possible  application  of  moral  forces  in  the  power  of 
the  moralist  and  the  Christian,  whereby  men  may  be  lifted 
out  of  these  morasses  of  society,  and  restored  to  virtuous 
self-control,  self-support  and  self-reliance  ?  There  is  no 
good  citizen  who  is  not  deeply  interested  in  every  one  of 
these  questions,  and  the  man  who  passes  by  any  one  of 
them,  saying  this  is  no  concern  of  mine,  is  not  a  good 
citizen. 

§  229.  There  is  nothing  in  the  past  history  of  the 
world  to  justify  the  expectation  that  any  immediate  and 
effectual  remedy  of  these  evils  can  be  secured  by  the  ap- 
plication of  social  and  moral  forces,  and  we  are  forced 
back  upon  the  question  how  will  the  economist  deal  with 
them.  Our  answer  is,  he  can  deal  with  them  only  in 
negations,  but  those  negations  are  very  grave  and  im- 
perative. 

I.  We  must  not  repeal  or  disregard  the  great  funda- 
mental law  of  the  science^  that  every  man  owns  himself  and 
all  which  he  produces.  To  over-ride  that  law  under  any 
pretext,  is  not  to  relieve  the  poor,  but  to  make  everybody 
poor  and  all  poverty  hopeless.  That  law  is  the  gravi- 
tation of  the  economic  universe.  Repeal  it,  and  the 
whole  falls  to  pieces.  Repeal  it,  and  no  man  will  work 
except  for  the  supply  of  immediately  pressing  want. 
Why  should  a  man  work,  when  his  neighbor  who  will  not 
work  is  as  likely  to  enjoy  the  fruits  of  his  labor  as  him- 
self?   Under  such  an  order  of  things  there  can  be  no 


3l6  ECONOMICS. 

accumulation,  no  civilization.  Just  in  proportion  as  you 
weaken  one's  sense  of  security  in  the  enjoyment  of  the 
fruits  of  his  industry,  you  diminish  the  stimulus  to  labor, 
and  weaken  all  the  forces  that  impel  society  onward  in  a 
career  of  prosperity.  In  helping  a  few  you  bring  all  into 
peril. 

2.  Another  prohibition  which  science  lays  on  us  is, 
that  we  must  not  remove  from  any  man  the  fear  of  suffer- 
ing want^  as  a  consequence  of  neglecting  labor  and  frugality. 
We  have  shown  in  the  first  part  of  this  treatise,  that  all 
that  originally  induces  any  man  to  work,  is  the  seen 
necessity  of  working,  that  his  wants  may  be  supplied. 
Take  from  any  man  or  any  class  of  men  all  sense  of  this 
necessity,  and  they  will  cease  both  to  work  and  to  save. 
We  do  not  at  all  hesitate  to  say,  that  it  is  better  that 
some,  nay  that  many  should  suffer  want,  and  even  per- 
ish, than  that  these  two  prohibitions  should  be  disre- 
garded. If  the  laws  and  the  government  cannot  provide 
relief  for  the  poor  without  weakening  the  force  of  these 
two  fundamental  principles  of  our  science,  it  is  far  better 
that  they  should  abstain  from  any  interference,  and  leave 
the  poor  to  the  care  of  individual  charity.  If  in  our 
efforts  at  public  philanthropy,  we  weaken  these  great 
natural  forces,  we  make  ten  paupers  in  relieving  one. 
We  take  food  from  the  mouth  of  him  that  has  labored 
for  it,  and  give  it  to  him  that  is  living  in  idleness  on  the 
fruits  of  other  men's  toil.  Remove  the  hope  of  gain  and 
the  fear  of  want  from  men's  minds,  and  you  have  no  other 
motive  by  which  you  can  induce  men  to  exert  their 
powers  either  for  th^  own  or  for  the  common  good,  and 
all  must  go  down  together  into  the  common  wretchedness 
of  savage  life.  To  insist  on  these  two  prohibitions  is 
nearly  the  whole  which  our  science  has  to  say  of  pauper- 
ism. 

§  230.  Still  the  ear  of  humanity  cannot  be  entirely  deaf 


PAUPERISM.  317 

to  the  cry  of  suffering,  perishing  poverty.  It  is  to  be  hoped 
provisions  may  be  made  for  relieving  the  extreme  neces- 
sities of  the  poor,  without  any  dangerous  violation  of 
fundamental  laws.  The  first  principle  which  we  shall 
enunciate  as  the  result  of  experience  and  philanthropic 
inquiry  is,  that  relief  should  be  furnished  if  possible  only 
at  establishments  provided  for  the  purpose.  Experience 
shows  that  relief  granted  at  public  expense  to  the  poor  at 
their  own  homes  or  on  the  streets,  is  always  demoralizing. 
These  establishments  should  always  be  provided  with 
the  means  of  furnishing  employment  for  all  who  are 
aided,  and  all  should  be  required  to  work  to  the  full 
extent  of  their  ability.  "  By  the  sweat  of  thy  face  shalt 
thou  eat  thy  bread,''  is  a  divine  law,  and  men  must  not 
repeal  it.  Such  houses  for  the  relief  of  the  poor  may 
with  suitable  management  be  made  nearly  self-supporting. 
The  greatest  care  should  however  always  be  taken, 
not  to  throw  the  products  of  such  establishments  on  the  mar- 
ket at  rates  which  are  below  the  price  as  determined  by  gen- 
eral competition.  It  is  quite  ruinous  to  producers  in  any 
line  of  industry,  to  be  liable  to  be  undersold  by  the  pro- 
ducts of  the  labor  of  those  who  are  not  working  for  a 
living.  It  is  the  case  of  the  needle-woman  over  again  in 
another  form.  It  is  better  to  support  either  paupers  or 
prisoners  entirely  at  the  public  expense,  than  to  ruin  the 
business  of  honest  and  industrious  men  by  such  an  un- 
natural competition.  Indeed  it  is  no  competition.  True 
competition  is  a  struggle  for  life  on  both  sides.  In  this 
case  life  is  at  stake  on  one  side  and  not  on  the  other. 
For  this  reason  it  is  always  best  to  employ  the  labor  of 
paupers  in  producing  those  great  staples,  the  demand 
for  which  is  so  large,  that  their  competition  will  produce 
no  appreciable  effect  on  price.  Such  a  public  provision 
for  the  poor  or  the  unfortunate  should  never  be  permitted 
^o  underbid  independent  individual  labor. 


3lS  ECONOMICS. 

§  23 1.  The  reason  for  confining  the  relief  of  the  poor  to 
public  establishments  is,  that  multitudes  would  apply  for 
and  accept  relief  at  their  own  houses  or  in  begging  from 
door  to  door,  who  would  never  ask  for  it  if  they  could 
receive  it  only  at  the  poor-house.  We  would  be  glad 
to  be  considerate  of  the  feelings  of  the  poor.  Christian 
charity  will  find  innumerable  cases,  in  which  the  duty  of 
soothing  and  sparing  the  feelings  of  the  sufferer  is  just 
as  imperative,  as  the  duty  of  supplying  food  and  clothing. 
But  we  are  speaking  of  public  provisions  for  the  relief 
of  paupers,  and  in  constructing  a  system  for  this  purpose, 
the  poor  must  consent  and  be  content  to  receive  aid  in 
ways  consistent  with  the  greatest  good  of  the  whole, 
and  not  in  disregard  of  it.  Society  must  not  make  such 
provisions  for  the  relief  of  the  poor,  as  to  take  from 
poverty  all  its  terrors.  The  sufferings  of  poverty  are 
nature's  penalty  for  idleness,  and  no  community  has  any 
right  to  repeal  that  penalty.  Out-door  relief,  that  is  re- 
lief of  the  poor  at  their  own  homes  removes  all  limits, 
and  speedily  introduces  into  practice  the  vicious  prin- 
ciple, that  every  necessitous  person,  no  matter  how  his 
necessity  may  have  been  caused,  has  a  right  to  be  re- 
lieved. This  is  the  fundamental  principle  of  The  Eng- 
lish Poor  Law,  and  it  is  admitted  by  economists  and 
philanthropists  to  have  fearfully  extended  the  area  of 
English  pauperism,  and  to  have  produced  a  state  of 
things  which  sometimes  occasions  serious  apprehension 
for  the  future  of  English  society.  Let  the  principle  once 
be  established,  that  every  one  who  is  really  necessitous 
has  a  right  to  be  relieved  at  public  expense,  and  may 
obtain  the  relief  he  needs  by  simply  making  his  neces- 
sities known,  and  disastrous  consequences  are  inevita- 
ble. As  soon  as  the  times  are  hard  and  the  procuring 
of  the  necessaries  of  life  becomes  difficult,  application 
will   at  once  be   made  for  aid  at  the   public  expense. 


PAUPERISM.  319 

This  application  once  made  and  granted  will  be  repeated 
and  urged  as  long  and  as  often  as  the  difficulty  of  living 
continues.  Having  found  a  source  of  supply  easier  than 
industry  and  frugality,  a  man  will  cease  to  depend  on 
these  or  to  practice  them,  and  his  demands  on  the  pub- 
lic treasury  will  be  more  frequent,  larger  in  amount,  and 
more  urgent.  Soon  he  is  a  pauper  for  life  with  his  fam- 
ily. If  there  had  been  no  relief  short  of  the  poor-house, 
he  would  have  increased  his  efforts,  and  gotten  by  the 
hard  place  without  ever  becoming  a  pauper  at  all. 

The  influence  of  every  such  rase  is  very  bad  upon 
neighbors,  whose  circumstances  are  about  equally  hard. 
Seeing  one  neighbor  relieved  at  public  expense  they  in- 
quire why  they  should  not  have  such  help  as  well  as  he, 
especially  seeing  that  their  labor  is  taxed  for  his  sup- 
port. One  such  seed  of  pauperism  dropped  in  a  neigh- 
borhood soon  yields  a  large  harvest.  We  do  not  desire 
to  swell  this  volume  with  the  statistics  of  English  pauper- 
ism. But  we  advise  every  one  to  look  into  them  and 
take  warning.  English  pauperism  sometimes  puts  on 
aspects  so  grave,  that  it  seems  to  threaten  to  engulf 
the  wealth  of  England,  great  as  it  is.  The  subject  is  re- 
garded with  solem.n  apprehension  by  all  thoughtful  Eng- 
lishmen. English  poor  relief  has  not  only  tended  to 
increase  the  number  of  paupers,  but  it  has  actually  in- 
creased it  on  a  vast  scale.  It  is  an  experiment  which 
ought  not  to  be  lost  sight  of  in  this  country.  It  is  bet- 
ter for  all,  rich  and  poor,  that  some  should  perish  of 
want,  than  that  such  a  cancer  should  fasten  itself  upon 
the  nation. 

This  view  of  the  subject  assumes  peculiar  importance 
and  seriousness  in  a  country  which  is  governed  by  uni- 
versal suffrage.  In  many  of  our  states,  perhaps  in  all,  a 
man  does  not  cease  to  be  a  voter  by  becoming  a  pauper. 
He  not  only  contributes  nothing  to  the  support  of  the 


320  ECONOMICS. 

government,  but  his  daily  bread  is  drawn  by  taxation 
from  the  fruits  of  other  men's  labor ;  yet  his  vote  has 
just  as  much  weight  as  that  of  the  most  industrious, 
frugal  and  thrifty  citizen.  He  votes  the  appropriation 
of  other  men's  earnings  to  his  own  maintenance.  We 
suspect  any  intelligent  foreigner,  on  first  becoming  ac- 
quainted with  this  fact,  would  regard  it  with  astonish- 
ment. It  is  humiliating  to  acknowledge,  that  in  some 
states  at  least  our  poor  laws  are  so  constructed,  as  to 
admit  of  and  favor  the  distribution  of  bribes  to  the  voter 
under  pretense  of  relieving  the  necessitous.  It  cannot 
be  denied,  that  there  are  some  cases  in  which  municipal 
authorities  incur  the  just  suspicion  of  administering  the 
poor  laws  in  this  manner,  for  the  purpose  of  securing 
their  own  reelection.  It  needs  no  prophet  to  foretell,  that 
under  poor  laws  so  constructed  and  administered,  pau 
perism  will  be  likely  to  increase  with  alarming  rapidity. 
This  evil  has  not  as  yet,  in  most  parts  of  our  country, 
grown  to  alarming  dimensions.  But  principles  have 
found  their  way  into  our  legislation,  which  are  produc- 
ing serious  inconvenience  in  some  localities,  and  are 
fitted  to  awaken  grave  apprehension  as  to  what  may 
happen,  when  our  population  shall  become  dense  and 
the  means  of  subsistence  difficult  to  be  obtained.  The 
law  should  surely  be  so  constructed,  as  to  set  no  tempta- 
tion before  public  officers  to  encourage  pauperism  by 
bribing  voters,  and  the  time  to  arrest  such  an  evil  is 
while  it  is  yet  in  its  infancy. 

§  232.  Establishments  for  the  relief  of  the  poor  should 
be  public  reformatories.  Vice  is  incomparably  the  most 
fruitful  of  all  the  causes  of  poverty.  So  soon  as  any  one 
throws  himself  upon  the  public  for  relief,  no  time  should 
be  lost  in  resorting  to  alTknown  appliances  tending  to 
moral  reformation  and  self-government.  No  one  should 
continue   to   receive   either   public   or    private   charity 


PAUPERISM.  321 

while  persisting  in  the  practice  of  those  vices  and  self- 
indulgences  which  have  reduced  him  to  poverty.  A 
great  deal  of  poverty  is  caused  by  indulgences  of  the  ap- 
petites, which  are  so  common  as  hardly  to  be  considered 
criminal.  Many  a  man  who  has  spent  his  life  in  compara- 
tive plenty,  will  find  on  examination,  that  if  he  had  added 
to  his  necessary  expenses  the  unnecessary  expense  of 
tobacco,  he  must  have  spent  his  life  on  the  very  verge  of 
want.  Houses  for  the  relief  of  the  poor  should  be  so  con- 
ducted, as  to  cultivate  in  the  highest  degree  habits  and 
principles  of  frugal  self-government. 

Nor  is  this  enough.  The  men  who  are  obviously  living 
such  lives  of  vicious  self-indulgence  as  must  necessarily  re- 
duce them  and  their  families  to  'wa?tt,  should  be  ar7'ested  in 
the  midst  of  their  career^  and  placed  at  once  under  such  re- 
straints as  will  save  the  living  of  their  families  from 
further  waste,  and  under  such  reformatory  influences  as 
may  tend  to  restore  them  to  the  paths  of  virtue.  The 
most  common  and  perhaps  the  most  destructive  of  all 
the  vices  which  are  multiplying  and  aggravating  pauper- 
ism among  us  is  drunkenness.  For  half  a  century  the 
best  portion  of  American  society  has  been  well  aware  of 
the  prevalence  and  destructive  character  of  this  vice, 
especially  of  its  tendency  to  increase  the  amount  of  hope- 
less poverty.  Many  plans  have  been  proposed  and 
many  experiments  made,  to  restrain  and  eradicate  the 
evil.  These  efforts  have  certainly  not  been  without 
some  success,  but  it  must  be  admitted  that  the  degree 
of  success  which  has  attended  them  has  fallen  far  short 
of  the  wishes  and  even  of  the  hopes  of  the  philanthropist. 
We  suggest  that  in  one  very  important  particular,  they 
have  been  fundamentally  defective.  They  have  not  held 
the  inebriate  himself  to  a  due  responsibility  for  the  con- 
sequences of  his  life.  We  have  no  wish  to  screen  from 
censure  the  men  who  obtain  their  own  living  by  know 

14* 


322  ECONOMICS. 

Ingly  selling  to  their  neighbors  the  means  of  ruining 
their  families  and  bringing  destruction  on  themselves. 
But  after  all  the  primary  responsibility  is  on  the  inebriate 
himself  No  community  should  allow  its  members  to 
waste  their  earnings  and  destroy  their  own  power  to 
labor  by  lives  of  vicious  sensuality,  and  then  throw  their 
families  and  perhaps  at  last  the  miserable  remnant  of 
themselves  upon  public  or  private  charity  for  support. 
The  men  who  are  living  such  lives  should  be  arrested  in 
them  at  once  by  the  friendly  hand  of  society,  pronounced 
by  a  legal  process  incapable  of  self-care,  and  placed 
under  a  conservator  with  power  to  protect  and  restrain 
them,  save  their  property  from  waste  and  apply  it  for  the 
support  of  their  families.  Any  prohibitory  legislation 
which  treats  the  inebriate  as  a  mere  victim  to  be  pitied, 
and  throws  the  whole  responsibility  of  the  evil  upon  the 
seller,  is  radically  defective.  A  community  that  allows 
inebriates  to  go  unrestrained,  till  they  have  reduced 
themselves  and  their  families  to  pauperism,  should  bear 
the  burden  of  supporting  them  without  a  murmur.  We 
place  the  men  who  have  become  insane  through  the  in- 
evitable providence  of  God  under  effectual  restraint,  so 
that  they  may  neither  harm  themselves  nor  others. 
How  much  more  then  should  we  impose  restraints  no 
less  effectual,  upon  persons  who  are  almost  daily  making 
themselves  insane,  objects  of  disgust  and  terror  to  the 
families  they  ought  to  protect. 

§  233.  The  aspect  of  the  subject  just  presented  sug- 
e:ests  another,  the  consideration  of  which  must  not  be 
omitted.  Society  often,  by  its  toleration  of  vices  which 
it  ought  to  prohibit,  by  lending  its  countenance  to  prac- 
tices on  which  it  ought  to  frown,  becomes  responsible  for 
their  existence^  and  i?icurs  a  moral  obligation  to  relieve  thi 
poverty  which  they  occasion^  even  though  in  affording  such 
relief  it  violates  public  policy.     If  the  community  deals 


PAUPERISM.  323 

with  a  traffic  in  spirituous  liquors  or  with  incitements  to 
any  other  vice  by  legislation  that  tends  to  countenance 
and  encourage  it,  instead  of  discountenancing  and  re- 
straining it,  that  community  becomes  thereby  morally 
bound  to  support  the  widows  and  orphans  that  have  thus 
been  reduced  to  poverty.  Let  every  such  traffic  receive 
from  the  community  the  frown  of  indignant  rebuke,  and 
feel  the  hand  of  rigorous  restraint  and  repression.  Ex- 
terminate such  a  traffic  if  you  can  ;  if  you  cannot,  restrain 
it  as  much  as  possible. 

This  consideration  has  a  special  force  in  relation  to 
all  those  systems  of  legislation  which  construct  society 
on  a  false  principle,  and  place  large  classes  of  men  in 
conditions  so  disadvantageous,  as  necessarily  to  reduce 
them  to  hereditary  pauperism.  We  regard  for  example 
the  English  system  for  the  relief  of  the  poor,  with  ex- 
treme disapprobation,  as  dangerous  to  all  her  future. 
But  we  should  grieve  to  see  provisions  for  the  relief  of 
the  poor  abolished,  while  the  agricultural  laborer  remains 
in  his  present  unfavorable  condition.  We  should  say, 
abolish  your  poor  rate  if  you  must,  but  in  the  name  of 
humanity  abolish  your  land  monopoly  at  the  same  time. 
If  the  land  monopoly  is  to  be  retained  and  perpetuated, 
surely  those  interested  in  its  perpetuity  should  not  refuse 
to  support  the  agricultural  poor. 

Before  leaving  this  painful  subject  we  must  remind 
the  reader,  that  the  mere  economist  cannot  deal  with  it 
in  its  totality.  Its  deepest  roots  are  not  in  our  science, 
but  in  the  sister  science  of  ethics.  Men  are  pressed 
down  into  the  morasses  of  society  far  more  by  moral 
than  by  economic  causes.  And  even  when  some  mal- 
adjustment of  the  economies  of  society  is  the  primary 
cause  of  the  evil,  the  cure  must  still  be  chiefly  moral. 
Adjust  and  re-adjust  our  economic  machinery  as  we  may, 
k  is  still  morality  that  makes  and  unmakes  humanity. 


324  ECONOMICS. 


CHAPTER  XVr. 


Wasteful  Expenditure. 

§  234.  It  has  already  been  remarked,  that  the  Iaw3 
which  regulate  the  application  of  the  products  of  indus- 
try to  their  appropriate  uses  belong  rather  to  the  depart- 
ment of  ethics  than  of  economics.  Yet  there  are  two  topics 
the  consideration  of  which  perhaps  more  properly  belongs 
to  the  moralist  than  to  the  economist,  but  which  are  so 
related  to  the  whole  economic  system,  and  so  vitally  im 
portant  to  it,  that  we  cannot  with  propriety  neglect  all 
consideration  of  them.  They  will  therefore  form  the 
subjects  of  the  two  concluding  chapters  of  this  treatise. 

§  235.  From  w^hat  has  already  been  said  it  is  obvious, 
that  all  the  uses  to  which  the  products  of  human  labor 
can  be  applied  are  divisible  into  two  classes.  One  class  is 
composed  of  all  which  is  expended  for  the  necessaries 
of  life.  This  class  we  shall  call  necessary  expenditure. 
The  other  class  consists  of  all  which  is  devoted  to  the 
gratification  of  desires,  the  satisfaction  of  which  is  not 
necessary  to  the  preservation  of  life  and  health  and  the 
continued  power  to  labor,  and  the  preservation  of  the 
race.  This  class  we  shall  call  disposable  expenditure. 
All  expenditure  of  the  first  class  is  so  determined  and 
fixed  by  the  natural  laws  of  life  and  health,  that  it  is  little 
dependent  on  human  intelligence  or  choice.  There  is 
indeed  opportunity  for  the  exercise  of  much  wisdom  in 
the  selection  of  materials,  and  of  much  skill  in  preparing 
them  for  use.  But  food,  clothing  and  shelter  must  be 
enjoyed  alike  by  rich  and  poor,  noble  and  peasant.  The 
rich  may  incur  much  expense  in  the  preparation  of  neces- 
saries which  the  poor  cannot  afford,  but  the  necessities 


WASTEFUL    EXPENDITURE.  325 

of  the  case  are  universal  and  poverty  itself  is  no  ex- 
emption. But  in  the  use  which  is  made  of  that  portion 
of  the  products  of  labor  which  we  have  called  dispos- 
able, men  differ  very  widely,  and  on  the  use  which  they 
make  of  them  the  prosperity  and  happiness  of  society 
very  largely  depend. 

§  236.  Almost  immediately  after  the  strictly  necessary 
wants  of  men  are  supplied,  we  find  in  almost  all  com- 
munities a  vast  demand  for  a  few  articles  of  diet,  which 
certainly  are  not  necessaries  of  life,  and  of  which  some  ap- 
pear to  be  in  ordinary  circumstances  injurious.  They  do 
not  minister  to  nutrition,  but  produce  their  effect  on 
comfort  and  happiness,  by  operating  directly  upon  the 
nervous  system,  by  exciting,  tranquilizing  and  narcotic 
influences.  The  demand  for  them,  in  a  great  number  of 
cases,  is  so  imperative  and  urgent,  that  for  the  sake  of 
obtaining  them  men  will  often  sacrifice  the  food  and 
clothing  necessary  for  themselves  and  their  families. 
The  proportion  of  all  the  results  of  human  labor,  in  all 
the  civilized  countries  of  the  world,  which  is  expended 
for  spirituous  liquors,  tobacco,  tea,  coffee  and  opium  almost 
surpasses  belief  It  is  hard  for  science  to  demonstrate 
what  beneficial  influence  they  exert  on  the  human  econ- 
omy. Some  of  them  are  certainly  employed  by  great 
numbers  in  such  a  manner  as  to  be  destructive  of  reputa- 
tion, impair  health,  shorten  life,  render  men  incapable  of 
labor  or  self  control,  waste  property  and  wreck  the  whole 
man.  These  sad  phenomena  are  exhibited  not  in  a  few 
occasional  instances,  but  in  great  numbers,  in  all  classes 
of  society  and  in  all  the  conditions  of  life.  Yet  the  ex- 
penditure of  our  country  for  these  articles  nearly  ap- 
proaches if  it  does  not  equal  or  exceed  the  cost  of  bread 
or  necessary  clothing.  Those  substances  belonging  to 
this  class  which  are  most  in  demand,  and  most  open  to 
the  charge  of  being  far  more  injurious  than  beneficial 


326  ECONOMICS. 

are,  under  our  present  revenue  system,  subjected  to  a  tax 
which,  if  enforced  against  almost  any  other  article  not  a 
necessary  of  life,  would  be  prohibitory,  without  any 
perceptible  diminution  of  the  demand.  Many  of  the 
most  enlightened,  virtuous  and  philanthropic  men  among 
us  believe,  that  at  least  the  traffic  in  intoxicating  liquors 
«s  destructive  of  public  health  and  morals,  and  ought  to 
be  suppressed  as  a  public  nuisance.  Yet  under  all  these 
discouragements  and  burdens,  the  traffic  is  openly  pur- 
sued, and  the  consumption  seems  to  be  increasing  with 
all  its  evil  consequences. 

§  237.  It  is  not  our  business  to  deal  with  the  ques- 
tion of  the  relation  of  these  substances  to  the  human 
constitution,  and  to  the  laws  of  life  and  health.  That 
question  belongs  to  the  chemist,  the  physiologist  and  the 
physician.  But  the  existence  of  an  expenditure  so  vast, 
and  in  some  of  its  aspects  so  destructive, y^r  which  science 
can  render  so  little  account^  and  furnish  so  little  justifica- 
tion, is  not  creditable  to  our  civilization.  The  same  re- 
mark may  be  made  with  very  little  modification  in  rela- 
tion to  the  whole  civilized  world.  Civilized  men  should 
surely  act  more  intelligently  and  reasonably  in  relation 
to  a  subject  of  such  impprtance.  If  intoxicating  drinks 
render  some  service  to  the  human  constitution,  which 
justifies  the  enormous  expense  incurred  by  the  use  of 
them,  and  the  risks  encountered,  certainly  science  should 
be  able  to  demonstrate  it,  and  relieve  the  conscience  of 
the  nation,  which  evidently  at  present  is  ill  at  ease  on 
the  subject.  If  these  substances,  especially  intoxicating 
drinks,  have  no  such  beneficial  relation,  the  whole  en- 
ergy of  a  civilized  people  should  be  exerted,  to  arrest  so 
wasteful  and  destructive  an  expenditure.  If  we  can  place 
any  reliance  on  statistics,  a  very  few  years  of  the  con- 
sumption of  intoxicating  drinks  alone  at  the  present  rate, 
will  equal  the  whole  cost  of  the  four  years  war  of  the 


WASTEFUL    EXPENDITURE.  327 

great  rebellion.  We  think  this  a  field  of  inquiry,  in 
which  scientific  research  should  be  prosecuted  with  ut- 
most earnestness.  Whence  this  craving  for  stimulus? 
Whence  this  appetite,  not  for  food,  but  for  destruction  ? 
The  life  we  are  living  as  a  nation  in  relation  to  this  mat- 
ter, and  to  a  great  extent  the  same  is  true  of  other  civ- 
ilized nations,  is  more  brutal  than  human.  We  are  obey- 
ing the  blind  impulse  of  appetite  instead  of  being  guided 
by  enlightened  reason. 

§  238.  There  is  another  branch  of  expenditure,  which, 
though  less  destructive,  is  scarcely  less  wasteful  or  more 
rational.  We  refer  to  the  passion  for  excessive  personal 
ornamentation.  It  has  already  been  clearly  shown,  that 
a  true  economy  enters  no  protest  against  the  love  of  the 
beautiful.  The  resources  of  the  world  and  the  powers 
of  man  are  evidently  so  adjusted  to  human  want,  that 
ample  provision  has  been  made  for  the  ornamental  as 
well  as  for  the  necessary  ;  and  the  latter  must  be  culti- 
vated or  a  large  amount  of  human  power  must  be  quite 
useless  to  mankind.  Beauty  is  a  real  good,  and  humanity 
fitly  adorned  is  a  far  nobler  thing  than  if  unadorned. 

But  the  methods  in  which  the  ornamental  is  pursued 
and  applied  deserve  attention.  Every  one  knows  that 
in  the  real  world  around  us,  the  use  of  ornament  is  not  reg- 
ulated by  any  permanent  canons  of  beauty,  and  that  in  this 
whole  department  fashion  rules  with  an  undisputed 
supremac3^  We  are  not  going  to  attempt  a  scientific 
definition  of  fashion,  yet  it  is  obvious  that  a  certain 
capricious  thing  known  by  that  name  has,  in  respect  to 
ail  that  is  designed  to  be  ornamental,  more  influence 
than  reason.  It  is  our  duty  here  as  everywhere  to  hear 
the  voices  of  nature,  and  there  are  teachings  of  nature  in 
this  department,  which  lead  to  the  regulation  of  the 
ornamental  on  principles  which  perhaps  we  could  not 
have  anticipated.     There  is  a  natural  taste   for  rank. 


328  ECONOMICS. 

Society  tends  to  arrange  itself  in  grades  one  above  an- 
other. Against  the  aristocracy  which  intrenches  itself 
in  legislation,  all  Americans  protest.  But  after  all  we 
are  not  less  devoted  to  the  conventional  aristocracy  of 
custom  than  other  peoples,  and  the  classes  esteemed  the 
higher  are  not  less  jealous  than  other  aristocracies  of  the 
peculiar  privileges  and  honors  which  they  claim  for  them- 
selves. They  cannot  be,  in  such  a  society  as  ours, 
permanent,  but  are  as  changing  as  drifting  masses  of 
sand.  Men  go  up  to-day  and  down  to-morrow,  but  this 
makes  them  by  no  means  less  desirous  to  render  the 
boundary  lines  of  the  high  rank,  to  which  they  claim  to 
belong  as  clearly  drawn  as  possible. 

§  239.  In  this  social  rivalry  there  is  a  constant  en- 
deavor so  to  employ  persoftal  ornament,  as  to  make  it  dis~ 
tinctive  of  that  rank  in  which  one  claims  a  place.  The 
style  of  dress  and  equipage  which  is  for  the  time  being 
the  badge  of  the  highest  social  position,  is  eagerly  emu- 
lated by  all  that  are  below.  No  costliness  is  spared  by 
the  prosperous  merchant,  mechanic  or  farmer,  to  array 
his  household,  especially  his  wife  and  daughters,  in  the 
style  that  is  recognized  as  the  badge  of  high  society.  In 
a  short  time  any  style  that  is  thus  emulated  will  cease  to 
be  a  badge  of  distinction  ;  it  will  have  descended  to  the 
multitude,  and  the  leaders  of  fashion  must  invent  some 
new  mark  of  distinction.  This  soon  shares  the  same  fate. 
Thus  new  costumes  of  gentility  follow  each  other  almost 
with  the  rapidity  and  capriciousness  of  the  changes  of  the 
wind,  and  a  burden  of  expense  is  brought  upon  the  com- 
munity almost  unlimited.  The  love  of  the  beautiful  is  to 
a  great  extent  supplanted  by  the  love  of  the  fashionable, 
and  the  expense  of  living  is  increased  beyond  all  reason- 
able limits. 

§  240.  This  cause  of  the  expensiveness  of  living 
operates  even  more  powerfully  in  a  democratic  community 


WASTEFUL    EXPENDITURE.  329 

than  any  other.  In  aristocratic  communities,  the  social 
pyramid  is  divided  into  portions  quite  definitely  distin- 
guished from  each  other  by  parallel  planes,  and  those  in 
the  lower  strata  accept  rather  contentedly  the  social 
position  assigned  them,  and  do  not  so  much  emulate  the 
style  of  ornamentation  which  is  the  badge  of  a  rank 
higher  than  their  own.  Rivalship  in  dress  is  in  some 
degree  limited  to  those  in  the  same  rank.  But  in  a 
democratic  society  no  such  recognized  social  planes 
exist.  7  hose  in  every  social  condition  emulate,  to  the 
best  of  their  ability,  the  external  symbols  of  the  highest 
gentility,  and  will  spare  no  expense  in  their  power  to 
incur,  to  attain  to  them.  An  element  of  expensiveness 
is  thus  introduced  into  the  whole  life  of  a  democratic 
people,  more  burdensome  to  many  families  than  the 
entire  cost  of  necessary  food  and  clothing,  far  more  bur- 
densome than  the  taxation  imposed  on  us  by  our  national 
debt.  When  we  were  bearing  the  burden  of  the  income 
tax,  exemption  was  made,  even  in  our  time  of  extreme 
necessity,  for  all  whose  income  did  not  exceed  six  hun- 
dred dollars.  But  this  is  a  tax  that  knows  no  exemption. 
It  is  levied  on  a  father's  and  a  mother's  pride  in  the 
social  position  of  their  daughters,  and  is  therefore  sure 
to  be  paid,  even  at  the  expense  of  bankruptcy  at  no  dis- 
tant day,  and  not  seldom  of  a  widowhood  and  orphanage 
of  uncomforted  want  and  povert}'.  This  picture  will  be 
found  to  be  true  to  the  life  in  instances  sadly  numerous. 
If  we  are  to  have,  at  no  distant  day,  a  mass  of  pauperism 
as  fearfully  vast  and  hopeless  as  older  civilized  countries, 
the  cause  of  which  we  are  speaking  will  bear  a  most  im- 
portant part  in  bringing  it  upon  us,  and  in  pressing  down 
our  own  sons  and  daughters  into  it. 

We  are  not  denouncing  fashion.  We  have  admitted 
thut  it  grows  out  of  certaitt  principles  in  human  nature^ 
which  cannot  be  eliminated.     But  it  is  well  for  us  all  to  be 


33°  ECONOMICS. 

aware  of  the  destructive  excesses  and  perversions  to  which 
those  principles  are  liable,  and  to  be  put  on  our  guard 
against  them.  It  is  not  beneath  the  dignity  of  science, 
to  point  out  the  influence  of  this  cause  on  the  expendi- 
tures of  a  community,  and  to  show  how  much  safer  guide 
to  true  prosperity  is  found  in  the  cultivation  of  a  taste 
for  the  really  beautiful,  the  fittingly  ornamental,  than  in 
following  the  ever  shifting  caprices  of  fashion.  Is  the 
elevation  of  a  free  community  to  this  nobler  standard  of 
life  a  thing  to  be  despaired  of? 

This  subject  is  worthy  of  grave  consideration,  not 
only  in  the  homes  of  those  whose  resources  are  scanty, 
but  in  the  mansions  of  the  rich.  The  latter  maybe  able 
to  bear  the  exactions  of  fashion  without  being  distressed 
by  them.  But  they  might  easily  learn,  that  these  fash- 
ionable follies  render  their  lives  much  less  dignified  and 
honored  than  they  might  be,  and  that  the  sums  that 
could  easily  be  redeemed  from  this  waste  could  be  de- 
voted to  the  accomplishment  of  objects  which  would 
afford  them  much  more  rational  and  enduring  happiness. 
Perhaps  they  are  not  aware  of  the  profound  pleasure 
which  many  cultivated  persons  experience  in  visiting  an 
attractive  home  of  wealth,  where  good  taste  has  dictated 
everything,  fashion  nothing.  If  such  persons  will  break 
away  from  this  bondage,  they  will  not  only  have  a  de- 
lightful sense  of  freedom,  but  they  will  do  a  great  deal 
to  protect  those  in  less  favored  conditions  of  life  from 
the  destructive  fascination  of  fashionable  folly.  If  the 
canons  of  taste  instead  of  the  canons  of  fashion  can 
once  make  their  authority  respected  in  the  homes  of  the 
wealthy,  there  is  hope  we  may  yet  be  a  truly  economical 
people. 

§  241.  The  prevalence  of  this  unwise  style  of  expend- 
iture is  the  more  to  be  deplored,  on  account  of  \Xs  power- 
ful tendency  to  prevent  the  formation  of  a  taste  for  the  really 


WASTEFUL    EXPENDITURE.  33 1 

beautiful.  There  are  a  great  many  homes  in  which 
fashion  exacts  an  untold  amount  of  costliness,  where 
there  is  yet  a  sad  lack  of  almost  everything  that  is  really 
beautiful,  or  even  convenient  and  comfortable.  Costly 
gentility  in  public  and  before  the  world,  the  merest  hum- 
drum in  their  ordinary  routine  in  private,  make  up  life. 
Such  a  tendency  is  unfavorably  affecting  our  national 
character.  Of  course  expenditure  imposes  its  law  on 
production.  Labor  and  capital  can  only  be  made  to 
yield  profit,  when  they  are  employed  in  producing  what 
the  people  desire  to  purchase.  If  the  people  are  dis- 
posed to  expend  their  resources  chiefly  upon  the  latest 
fantastic  productions  of  the  tailor,  the  milliner  and  the 
dressmaker,  little  will  be  left  for  the  genuine  artist. 
True  art  must  be  expected  to  languish  very  much  in 
proportion  as  the  arts  which  fashion  patronizes  are  en- 
couraged and  rewarded.  The  question  has  been  much 
discussed,  whether  the  fine  arts  are  likely  to  flourish  in 
our  country.  That  must  depend,  not  upon  our  political 
institutions,  but  on  the  dominant  ideas  and  prevailing 
tastes  of  our  people.  The  character  of  our  people  is  to 
make  this  country  great,  or  to  belittle  it.  Art  did  pre- 
vail in  democratic  Athens  more  than  among  any  other 
people  on  earth,  and  prevailed  most  when  she  was  most 
democratic.  If  a  democratic  people  loves  beauty  and 
has  a  true  taste  for  it,  cities  and  villages  and  rural  homes 
will  be  full  of  the  productions  of  true  art.  But  if  it  loves 
nervous  stimulation  and  follows  blindly  the  caprices  of 
fashion,  its  public  gatherings  may  be  full  of  meretri- 
cious magnificence,  but  both  its  public  and  its  private 
places  will  be  dolefully  barren  of  all  the  grandest  pro- 
ductions of  genius. 

§  242.  To  give  the  law  of  competition  free  course  is 
to  make  the  people  the  arbiters  of  their  own  destiny.  Men 
who  are  really  free  to  buy  and  to  sell,  to  employ  and  to 


332  ECONOMICS. 

be  employed,  to  own  land  and  to  sell  land,  will  also  be 
free  to  expend  their  disposable  resources  according  to 
their  own  tastes;  and  by  their  folly  to  make  themselves 
mean,  or  by  their  wisdom  to  make  themselves  great  and 
renowned  in  the  earth.  We  have  unequaled  advantages 
for  accumulating  wealth,  and  unlimited  freedom  in  ex- 
pending it.  By  the  very  abundance  of  our  resources  and 
the  freedom  which  we  enjoy,  it  is  placed  in  our  own 
hands  to  become  the  greatest  or  the  meanest  of  nations. 
That  momentous  question  turns  on  the  single  hinge  of 
private  expenditure.  If  our  prevailing  tastes  are  low, 
vulgar,  and  sensual,  the  world  will  minister  to  our  grati- 
fication and  our  ruin.  If  our  tastes  are  pure  and  rational 
and  wise,  the  world  will  no  less  contribute  to  our  gratifi- 
cation, and  to  our  growth  in  all  that  is  noblest  in  man- 
hood, and  worthiest  of  our  privileges  and  our  freedom. 

§  243.  The  question  how  men  expend  their  power  to 
labor,  is  no  less  interesting,  than  the  use  they  make  of  its 
results.  The  common  human  patrimony  is  equally  af- 
fected by  the  waste  or  misapplication  of  the  one  or  the 
other.  It  has  been  shown  in  its  proper  place,  that  the 
increase  of  human  power  by  the  use  of  labor-saving  ma- 
chinery does  not,  as  might  have  been  anticipated,  minister 
to  idleness,  by  dispensing  with  the  necessity  of  labor,  but 
on  the  contrary  greatly  increases  the  demand  for  it  in 
every  department.  But  while  this  is  true,  it  does  never- 
theless tend  to  the  rapid  increase  of  capital,  and  by  increas- 
ing capital  increases  the  number  of  those  who  are  not 
compelled  to  labor  by  any  necessity.  Will  it  not  then  di- 
minish the  amount  of  labor  actually  performed?  That  it 
does  to  some  extent  relieve  the  rich  from  the  pressure  of 
necessity  to  work  is  certainly  true.  But  if  the  rich  man 
himself  would  remain  rich,  his  life  must  be  pretty  indus- 
triously employed  in  managing  his  estate,  with  a  view  to 
its  preservation,  enlargement  and  right  use.     It  must 


WASTEFUL    EXPENDITURE.  333 

however  be  admitted,  that  there  are  not  a  few  deiiving 
their  subsistence  from  the  incomes  of  the  rich,  who  do 
spend  aimless  lives,  devoted  only  to  the  enjoyment  of 
each  gratification  of  desire  which  for  the  present  mo- 
ment seems  most  attractive.  In  just  so  far  as  the  pos- 
session of  wealth  induces  those  who  subsist  by  it  to  lead 
such  lives,  it  is  ruinous  in  its  influence.  It  makes  those 
lives  worthless,  which  it  was  intended  to  render  more 
efficient  and  useful.  The  conception  with  which  we 
began  this  treatise,  that  every  human  being  is  a  laborer, 
is  accordant  with  the  only  true  manhood.  He  who  in 
the  enjoyment  of  wealth  leads  a  life  without  any  aim  to 
achieve  something  worth  living  for,  falls  out  of  the  true 
human  life  into  the  life  of  an  irrational  animal.  His 
wealth  has  deprived  him  of  his  manhood.  All  who  are 
entrusted  with  riches  should  use  their  utmost  endeavor, 
that  they  be  not  thus  perverted  to  the  injury  of  any  who 
subsist  by  them.  There  are  innumerable  ends  which  a 
rich  man  may  pursue,  which  greatly  ennoble  and  adorn 
life,  and  yield  an  abundant  reward.  It  is  the  privilege 
of  those  who  are  relieved  from  the  necessity  of  toil,  to 
aim  at  and  achieve  results  which  are  beyond  the  reach 
of  the  utmost  endeavors  of  those  who  must  labor  for 
their  daily  bread.  That  is  a  very  unfortunate  rich  man, 
who  on  being  relieved  from  the  necessity  of  toiling  for 
subsistence,  knows  not  how  to  employ  himself  in  any- 
thing which  will  be  of  service  to  mankind. 


334  ECONOMICS. 


CHAPTER  XVII. 


Public  Liberality. 

§  244.  In  the  view  of  many,  this  topic  is  entirely  out- 
side of  our  science.  Several  recent  writers  have  accepted 
the  definition  of  the  science  proposed  by  Archbishop 
Whately, — The  Science  of  Exchange, — and  have  thus 
reduced  the  science  to  a  mere  "quid  pro  quo."  Our 
readers  are  already  well  aware  that  we  by  no  means  ac- 
cept this  definition.  We  believe  that  the  word  wealth 
may  be  so  defined  as  to  be  accurately  expressive  of  the 
whole  group  of  phenomena  of  which  the  economist  is  to 
treat,  and  comprehensive  of  all  the  uses  of  the  thing 
defined.  In  this  view  of  the  case  all  the  original  desires 
of  man  which  impel  him  to  labor  are  natural  forces  with 
which  the  sciefice  is  concerned. 

One  of  these  is  the  love  of  social  prosperity  and  well- 
being.  It  is  one  of  the  noblest  impulses  of  humanity,  and 
an  exceedingly  important  element  in  the  economic  sys- 
tem of  the  present  age.  Man's  power  to  render  the 
universe  helpful  to  human  well  being  by  the  exertion  of 
his  labor  was  designed  to  minister  to  the  gratification  of 
every  natural  desire  of  the  human  soul.  Man  may  not  only 
exert  his  powers  to  procure  what  he  desires  by  exchange, 
but  for  the  production  of  beauty  which  all  may  enjoy,  and 
none  can  appropriate,  and  for  that  perfected  civilization 
which  is  the  common  inheritance  of  mankind. 

There  are  common  wants  of  communities^  which  the  desirt 
of  gain  and  the  direct  expectation  of  profits  will  never  suf 
ficiently  provide  for.  Men  will  build  machines,  railways 
and  ocean  steamers  under  the  influence  of  the  hope  of 
gain,  and  they  will  realize  the  profits  the  hope  of  whicb 


PUBLIC   LIBERALITY.  335 

Stimulated  them  to  these  undertakings.  But  there  are 
some  of  the  very  highest  wants  of  men  of  which  they 
never  become  in  masses  sufficiently  conscious  to  provide 
for  them  on  principles  of  exchange.  Of  this  character 
are  hospitals  for  the  sick  and  suffering  stranger  or  un- 
fortunate, monuments  appropriately  to  record  the  great 
events  of  a  nation's  history,  and  to  honor  the  memory 
of  the  founders  of  states,  the  discoverers  of  science  and 
art,  and  the  benefactors  of  their  race,  colleges  and  uni- 
versities for  the  highest  culture  in  all  the  various  depart- 
ments of  knowledge,  and  libraries  in  which  the  thought 
and  wisdom  of  the  ages  shall  be  garnered  up  for  the  in- 
struction of  successive  generations,  and  made  accessible 
to  all  the  curious  and  the  studious. 

Governments  cannot  be  relied  on  to  supply  these  wants 
of  society.  In  no  country  has  the  government,  as  a 
general  rule  and  in  the  long  course  of  its  history,  cm- 
braced  within  itself  the  highest  thought  and  the  most 
perfect  culture  of  the  successive  generations.  Force,  not 
thought  or  argument  is  the  weapon  of  a  government,  and 
it  can  therefore  never  be  relied  on  for  quickly  and  keenly 
appreciating  those  moral  and  spiritual  forces,  which  are 
most  of  all  potent  and  beneficent  in  the  formation  of  the 
character  of  a  people  ;  and  of  course  it  cannot  safely  be 
trusted,  promptly  and  efficiently  to  apply  such  forces. 
The  sword  is  in  all  ages  the  emblem  of  civil  power,  and 
an  agency  adapted  to  wield  the  sword  with  effect  can 
hardly  be  expected  to  be  eminently  fitted  for  the  intel- 
lectual, moral  and  spiritual  culture  of  society.  Certainly 
the  experience  of  the  ages  has  shown  that  it  is  not. 
Here  then  is  a  wide  field  for  the  exertion  of  beneficent 
influence  on  all  the  future  of  society,  which  must  always 
invite  individual  effort.  Here  are  most  important  wants 
of  communities,  nations  and  the  race  that  can  be  sup- 
plied only  by  individual  liberality. 


33^  ECONOMICS. 

§  245.  It  has  been  shown  in  the  foregoing  treatise, 
that  with  the  increase  of  capital,  its  rate  of  profit  con- 
stantly declines.  With  this  decline  the  motive  to  ac- 
cumulation is  dimmished  also,  and  some  have  their  ap- 
prehensions, that  in  the  wealthier  countries  of  the  world, 
this  motive  may  become  sufficiently  enfeebled  to  arrest 
the  increase  of  capital.  Should  the  whole  civilized  world 
approach  such  a  plethora  of  capital,  there  would  be  a 
liability  to  rash  and  hazardous  speculation,  in  which 
much  capital  would  be  wasted,  and  the  rate  of  profit  of 
what  remained  would  be  thereby  raised.  But  the  same 
state  of  things  would  also  be  favorable  to  the  investmem 
of  capital  in  enterprises  of  public  liberality  without  any  direct 
expectation  of  profit  in  return.  When  capital  is  super- 
abundant and  profits  are  small,  it  may  be  expected  that 
the  owners  of  capital  will  incline  more  toward  the  side 
of  prodigality  than  of  frugality.  All  their  desires  are 
likely  to  be  more  freely  gratified.  But  if  the  moral  cul- 
ture of  society  has  not  been  neglected,  it  is  to  be  hoped 
that  all  would  not  be  swept  along  on  this  current  of  self- 
indulgent  folly.  Many  we  might  reasonably  hope  would 
gratify  the  highest  impulses  of  our  nature  in  the  enjoy- 
ment of  their  wealth,  rather  than  the  lowest  and  most 
debased.  As  a  true  civilization  attains  to  a  more  abun- 
dant supply  of  capital,  it  may  be  expected,  that  as  there 
will  be  increased  ability,  so  there  will  be  increased  dis- 
position, to  perform  acts  of  generous  liberality ;  and  that 
men  will  find  more  pleasure  in  expending  their  accumu- 
lations for  the  benefit  of  mankind,  than  for  sensual  or 
even  esthetic  gratifications. 

Men  of  wealth  can  never  afford  entirely  to  neglect  such 
outlays  of  capital,  even  if  they  have  regard  only  to  their 
highest  prosperity  in  trade.  The  sound  and  healthy  con- 
dition of  trade  always  depends  much  upon  the  intelli- 
gence of  the  community,  and  especially  of  men  of  lead- 


PUBLIC    LIBERALITY.  337 

ing  influence  in  it.  Men  of  wealth  are  in  their  own 
private  affairs  deeply  interested  in  the  higher  education — 
that  education  which  forms  the  character  of  the  leaders 
of  society.  For  example  the  doctrines  of  currency  and 
freedom  of  exchange  which  are  defended  in  this  treatise 
are  either  true  or  false.  If  they  are  false  it  is  exceed- 
ingly desirable  to  all  the  capital  of  the  country,  that  our 
schools  for  the  higher  education  should  not  favor  them, 
nor  give  them  currency  among  the  leading  minds  of  the 
nation.  If  they  are  false,  science  can  demonstrate  their 
fallacy,  and  effectually  guard  our  young  men  that  are 
growing  into  public  influence  from  adopting  them.  But 
if  they  are  true,  it  is  more  important  than  can  well  be  ex- 
pressed, that  all  nations  as  well  as  our  own  people  should 
as  rapidly  as  possible  be  persuaded  to  adopt  such  free- 
dom of  exchange  in  all  things,  and  between  the  inhabi 
tants  of  all  countries,  as  will  give  to  the  labor  and  capi 
tal  of  the  world  all  the  advantages  to  which  they  are 
naturally  entitled.  According  as  men  of  wealth  believe 
these  doctrines  to  be  true  or  false,  they  should  vie  with 
each  other,  in  securing  for  the  hopeful  young  men  of 
our  country,  a  true  knowledge  of  the  scientific  princi- 
ples which  underlie  all  production  and  all  exchange  of 
values.  It  is  the  present  misfortune  of  our  country,  that 
many  of  our  public  nen  have  never  considered  these 
matters  at  all,  and  are  ilischarging  public  functions  of  the 
gravest  importance  t(  all  the  interests  of  trade,  without 
having  received  any  education  in  the  scientific  principles 
which  underlie  all  such  questions.  This  cannot  be  a 
healthy  condition  of  affairs.  It  is  impossible  in  such  a 
country  as  ours  to  detach  individual  prosperity  from  pub- 
lic intelligence. 

§  246.  Apart  however  from  all  considerations  of  per- 
sonal interest,  it  is  fit  that  the  hope  of  achieving  something 
for  the  lasting  benefit  of  one^s  country  and  of  mankind 
IS 


33^  ECONOMICS. 

should  be  a  powerful  stimulus  to  an  industrious  and  frugal 
life.  The  man  who  seeks  to  obtain,  by  the  use  which  he 
makes  of  wealth,  the  exalted  pleasures  of  beneficence, 
will  insure  for  himself,  in  addition  to  that  deference  which 
wealth  itself  is  apt  to  inspire,  that  affectionate  reverence 
while  living,  and  that  grateful  remembrance  in  after 
years,  which  men  are  accustomed  to  accord  to  eminent 
wisdom  and  goodness. 

It  has  been  shown  elsewhere  that  by  the  very  law  of 
ownership,  the  rich  are  made  the  treasurers  of  a  portion  of 
the  common  patrimony  of  the  race.  Of  this  relationship 
men  are  apt  to  be  entirely  unconscious,  and  to  live  just 
as  they  would  if  they  only  were  interested  in  the  capital 
which  they  control.  Their  lives  would  be  much  wiser 
and  happier  if  they  would  recognize  this  fiduciary  relation 
in  which  they  stand  to  the  rest  of  the  world^  and  seek  to 
promote,  by  wisely  directed  effort,  that  general  well- 
being  to  which  they  cannot  help  ministering  by  their 
efforts  to  increase  their  own  wealth.  They  would  thus 
become  public  benefactors,  as  well  by  intelligent  purpose 
as  by  the  necessity  which  is  imposed  on  them  by  the  law 
of  ownership.  We  cannot  forbear  the  suggestion,  that 
when  capitalists  show  themselves  to  be  in  spirit  and  in- 
tention what  the  very  structure  of  the  economic  system 
compels  them  to  be,  they  will  accomplish  much  towards 
putting  an  end  to  that  dangerous  feud  between  capital 
and  labor,  which  is  awakening  so  much  just  apprehension 
in  the  minds  of  all  thoughtful  men.  When  all  men  see 
that  capital  is,  not  only  by  a  necessary  law  of  nature, 
but  with  voluntary  intention  and  purpose,  held  in  trust 
for  the  general  good,  the  laborer  and  his  employer  will 
feel  themselves  to  be  in  fraternal  and  not  in  hostile  rela- 
tions to  each  other.  The  employer  will  feel  that  the 
'aborer  is  a  natural  partner  in  the  business  in  which 
.hey  are  co  operataig,  and  will  gladly  recognize  his  r^ght- 


PUBLIC   LIBERALITY.  339 

ful  claim  to  considerate  regard.  The  laborer  on  his  pari 
will  feel  that  he  has  an  interest  in  all  the  products  he  is 
helping  to  create.  We  do  not  believe  this  unnatural  and 
ruinous  conflict  ever  can  be  terminated,  except  on  such 
terms  as  these.  All  must  come  to  recognize  that  com- 
munity of  interest  which  has  been  shown  to  pervade  the 
economies  of  the  world. 

§  247.  Great  care  must  be  taken  that  such  acts  of 
public  liberality  should  be  performed  in  such  a  manner 
and  under  such  conditions,  as  to  violate  no  economic  law. 
For  this  reason  no  public  itistitiition  of  charity  or  educa- 
tion should  h€  permitted  to  hold  lands  by  an  inalienable 
tenui'e.  We  are  aware  that  the  great  universities  of  Eng- 
land largely  owe  their  present  magnificent  endowments 
to  the  fact,  that  centuries  ago  they  were  endowed  with 
lands  which  they  could  not  alienate,  the  rent  of  which 
has  steadily  increased  with  the  progress  of  the  nation  in 
wealth  and  population.  It  may  be  asked  why  we  should 
not  provide  our  public  institutions  in  the  same  manner 
with  permanent  and  ever  increasing  resources.  We 
answer,  because  such  endowments  would  interfere  with 
that  free  trade  in  land  which  is  most  fundamental  to 
American,  and  it  seems  to  us  to  all  truly  free  society. 
One  great  obstacle  which  stands  in  the  way  of  the  speedy 
abolition  of  the  English  land  monopoly  will  be  found  to 
lie  in  the  vast  landed  estates  held  by  great,  permanent 
and  noble  institutions  of  learning  and  beneficence.  All 
those  who  are  most  intimately  related  to  those  institu- 
tions would  be  apt  vehemently  to  resist  the  change. 
But  the  permanent  prosperity  and  beneficent  power  of 
those  institutions  would  not  be  really  at  stake ;  to  us  on 
the  contrary  it  seems,  that  the  change  would  be  very 
happy  in  its  influence  on  them,  so  far  as  they  are  really 
rendering  important  service  to  the  society.  Endow- 
ments in  land  held  by  inalienable  tenure,  acquired  while 


340  ECONOMICS. 

society  was  yet  in  its  infancy  render  such  institutions  h 
dependent  of  the  thought  and  progress  of  each  living 
generation,  and  too  often  blindly  conservative  of  an 
antiquated  and  dead  past.  Public  funds  will  always  pro- 
duce greater  present  income  at  interest,  than  in  real  es- 
tate. If  therefore  all  real  estate  held  by  such  institutions 
is  made  alienable  at  the  discretion  of  trustees,  they  will 
be  under  a  strong  inducement  to  dispose  of  it  in  order 
to  obtain  a  greater  revenue  available  for  immediate  uses. 
Thus  the  freedom  of  exchange  will  not  be  interfered 
with,  and  the  immediate  productiveness  of  the  fund  will 
be  increased.  But  the  farther  increase  of  the  fund  from 
the  rise  of  real  estate  will  be  arrested,  and  for  its  grow- 
ing necessities  as  wealth  and  population  increase,  the 
institution  will  be  thrown  upon  the  liberality  of  each  suc- 
ceeding generation.  As  capital  is  rapidly  increasing,  if 
the  institution  is  performing  well  its  high  function,  the 
experience  of  this  country  shows,  that  that  liberality  will 
be  adequate  to  all  exigencies  as  they  arise.  Institutions 
founded  on  such  a  basis  may  always  be  expected  to 
stand  abreast,  not  of  the  whims  of  capricious  faction,  but 
of  the  sound  thought  and  healthful  progress  of  a  living 
civilization.  Funds  thus  invested  in  public  institutions 
of  beneficence  are  not  withdrawn  from  the  active  capital 
of  the  future.  It  makes  no  difference  to  one  who  wishes 
to  borrow  money,  whether  he  obtains  it  from  a  private 
capitalist,  a  bank  directory,  or  the  trustees  of  some  fund 
devoted  to  an  object  of  public  munificence.  Such  funds 
are  far  more  likely  to  be  preserved  from  loss  or  waste 
than  they  would  be  if  transmitted  to  uncertain  heirs,  and 
are  always  available  for  the  practical  use  of  the  age,  by 
the  payment  of  the  current  rate  of  interest.  Institutions 
thus  endowed  will  represent  the  highest  culture  of  the 
present,  as  they  should  do,  if  they  are  to  educate  the 
leading   minds   of  the   generation   that  is   to   succeed* 


PUBLIC    LIBERALITY.  34I 

They  will  still  be  conservative  rather  than  radical  in 
their  tastes  and  tendencies ;  but  they  will  not  be  rock- 
bound  islands  in  the  stream  of  progress,  which  the  cur- 
rent has  no  power  to  shake  or  to  wear  away,  bringing 
the  cultured  intellect  of  each  passing  age  into  hopeless 
and  perpetual  conflict  with  its  living  practical  thought. 

§  248.  A  government  so  purely  democratic  as  ours 
will  always  represent  the  average  thought  of  the  nation^  and 
never  its  highest  and  most  cultured  thought.  Yet  it  is 
evidently  most  desirable,  that  such  a  nation  should  have 
an  efficient  system  of  culture,  representing  its  highest 
thought,  and  controlled  by  it.  Such  a  system  it  can 
hardly  be  expected  to  have  under  purely  popular  control. 
Our  own  country  is  at  the  present  time  and  in  its  past 
history  able  to  furnish  ample  illustration  of  this.  It  is 
for  the  most  part  through  the  liberality  of  the  wealthy,  that 
such  a  system  of  liberal  culture  has  been  originated  and 
sustained.  The  most  cultivated  intellect  of  the  nation, 
cooperating  with  its  liberal  capitalists  has  a  duty  to  per- 
form, and  always  will  have,  which  cannot  be  neglected 
without  imminent  peril.  Thus  far  in  our  history  such  an 
alliance  between  the  intellect  and  the  capital  of  the 
country  has  always  existed,  and  has  produced  results 
most  eminently  satisfactory.  They  seek  no  alliance  with 
the  state,  they  ask  no  privileges  from  the  state,  they 
desire  to  lay  no  burden  upon  the  taxpayer ;  they  only 
ask  freedom  of  opportunity,  to  found  and  to  perpetuate 
the  highest  civilization,  by  the  exertion  of  intellectual 
and  moral  forces  only.  It  is  greatly  to  the  honor  of  our 
free  institutions,  that  the  public  liberality  of  individuals 
acting  only  on  the  voluntary  principle  has  laid  founda- 
tions so  ample,  and  reared  superstructures  so  creditable 
to  our  civilization.  Nor  is  there  any  reason  to  appre- 
hend, that  the  voluntary  principle  will  be  inadequate  to 
the  much  larger  necessities  of  the  future. 


342  ECONOMICS. 

§  249.  In  another  point  of  view  this  subject  seems 
invested  with  very  important  relations  to  interests  which 
are  directly  economic.  It  is  obvious  to  any  one,  that 
in  such  a  country  as  ours,  there  is  a  liability  that  the  ac- 
cumulation of  capital  may  be  prematurely  arrested.  We 
have  spoken  freely  in  the  foregoing  chapters  of  land 
monopoly,  and  have  very  earnestly  deprecated  it.  We 
have  no  intentions  of  retracting  or  modifying  anything 
which  we  have  maintained  on  that  subject.  But  we  wish 
to  deal  fairly  with  the  whole  question.  There  is  but  one 
known  way  in  which  the  name  and  honors  of  a  family 
can  be  handed  down  through  successive  generations. 
It  must  be  done,  if  done  at  all,  through  a  landed  estate, 
which  descends  inalienably  in  the  family  and  bears  its 
name.  When  such  facilities  are  afforded  by  the  laws  for 
perpetuating  a  great  family  interest,  men  are  induced  to 
accumulate  wealth  not  only  for  themselves  and  their 
children,  but  for  their  remote  posterity.  Under  such 
circumstances  there  will  always  be  a  strong  motive  to 
acquire  for  the  purpose  of  founding  and  improving  a 
family  estate,  and  adorning  a  family  mansion.  But 
under  such  a  law  of  descent  as  ours,  no  such  motive  can 
exist.  One  may  lay  up  for  hfs' children^  but  there  can  be 
little  hope  that  any  estate  which  he  can  accumulate  will 
reach  his  distant  posterity.  The  temptation  therefore  is 
to  live  more  for  the  present  and  less  for  the  future.  It 
cannot  be  denied,  that  one  of  the  dangers  of  American 
society  is,  that  each  generation  will  live  for  itself  alone,  and 
that  we  shall  be  characterized  alike,  by  the  greed  and 
rapidity  of  our  acquisition,  and  the  profusion  of  our  ex- 
penditure. We  seriously  ask  the  thoughtful,  if  there  are 
no  indications  of  the  development  of  such  a  national 
character.  Have  we  not  some  real  reason  to  apprehend  a 
growth  of  sensuality  and  fashionable  ostentation,  limited 
only  by  our  success  in  the  prosecution  of  gain  ? 


PUIJLIC    LIBERALITY.  343 

It  is  then  eminently  desirable  on  grounds  purely  eco- 
nomic, that  in  the  absence  of  the  possibility  of  men's 
calling  their  lands  by  their  own  names,  they  should  seek 
to  perpetuate  their  names  by  the  perjnanent  public  institu- 
tions of  learning  and  philanthropy  which  they  found  and 
foster.  The  names  of  Yale  and  Harvard  and  Phillips 
are  not  likely  to  be  forgotten.  It  is  also  not  improba- 
ble that  foundations  which  have  been  laid  in  the  great 
interior  of  our  country  may  confer  a  like  honor  on  their 
founders.  A  prevailing  disposition  among  the  capital- 
ists of  this  country  to  employ  their  capital  for  such  pur- 
poses would  do  much  to  arrest  these  tendencies  towards 
wasteful  prodigality,  to  raise  families  above  a  life  of 
sensuality  and  fantastic  display,  and  would  redeem  from 
waste  a  great  amount  of  capital  to  be  securely  held  at 
the  current  rate  of  interest,  and  just  as  available  to 
assist  and  reward  labor,  as  though  it  was  still  owned  by 
a  private  capitalist.  This  subject  is  worthy  of  the  most 
serious  attention,  on  account  of  its  economic  relations, 
over  and  above  all  its  relations  to  the  higher  culture. 
It  is  the  natural  and  proper  substitute  for  that  ambition 
of  family,  which  can  only  be  gratified  by  the  aristocratic 
tenure  of  land.  It  is  by  far  the  nobler  sentiment  of  the 
two,  it  is  in  perfect  harmony  with  democratic  institu- 
tions, and  can  be  freely  indulged  without  any  interfer- 
ence with  the  helpfulness  of  capital  to  labor,  or  with 
that  perfect  freedom  of  exchange,  which  must  sooner  or 
later  pervade  the  economies  of  the  world.  All  capital 
thus  disposed  of  will  fall  into  a  succession  in  which 
it  will  probably  have  the  best  chance  that  can  be  de- 
vised of  being  protected  from  waste  and  loss,  and  pre- 
served for  the  distant  future.  In  presenting  this  topic, 
we  therefore  believe  that  we  have  not  at  all  overstepped 
the  limits  prescribed  to  a  grave  scientific  treatise. 


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